The recent stock market correction has offered attractive deals for long-term investors. One industry that is turning up great values is social media.
Concerns about a slow advertising market have brought valuations for leading platforms down to tempting levels. If you have less than $200 to invest, you can easily afford at least one share of the following leaders.
Reddit (NYSE: RDDT) and Pinterest (NYSE: PINS) both entered 2025 with great momentum, yet their stocks have fallen well off recent highs. Here's why they could deliver handsome gains in the coming years.
1. Reddit
Reddit is a fast-growing community-driven platform with more than 100 million daily active users. The potential to grow its advertising revenue from a highly engaged user base sent the stock soaring after its 2024 initial public offering. And the recent pullback is a great opportunity to start a position at a more reasonable valuation.
The platform's daily active unique users grew 39% last year. Unlike other social media platforms, Reddit focuses on attracting users with its online communities, or "subreddits," which are basically online discussion boards for people with common interests.
It's a powerful business model for attracting advertisers. The company says more than 40% of internet users strongly consider recommendations from other users on the platform when shopping for a product.
Reddit is a gold mine for advertisers. It offers contextual ad solutions to place the most relevant ads for discussions happening on the platform. The company is investing in artificial intelligence (AI) and data analytics to continue improving its ad placement, which should benefit its growth. It's already performing well, with revenue soaring 62% last year.
After rocketing to a 52-week high of $230, the stock dropped 54% over fears of a slowing ad market in the near term. However, successful investing is about getting solid value for your shares in a growing business. Nothing has changed Reddit's long-term opportunity, yet the shares currently trade at a forward price-to-earnings (P/E) multiple of 34, which is quite attractive for a high-growth business.
There is a total of $276 billion of ad spending up for grabs across social media, according to Statista. With just $1.3 billion in trailing revenue, Reddit should grow into a significantly more valuable business over the long term.
2. Pinterest
Every social media platform has its own strategy for attracting users and winning its share of the ad market. Pinterest stands out for its focus on visual discovery using "pins," or images, that users post to the platform. This also creates a powerful business model that allows advertisers to tap into high purchase intent among a large base of 553 million monthly active users.
Pinterest has experienced ups and downs, but over the last few years, it has started to separate itself from competing platforms by focusing on fostering a more positive community that avoids the toxicity of other platforms. This has led to momentum in growing its users, with monthly active users up 11% year over year in the fourth quarter.
Pinterest has always been a platform that people use when researching ideas for a purchase. This is very appealing to advertisers, and they are clearly taking notice of the platform's momentum in attracting more users. Strong advertising demand drove an acceleration in revenue last year, improving from an increase of 12% year over year in the 2023 fourth quarter to 18% in the 2024 fourth quarter.
With Wall Street concerned about the near-term direction of the ad market, investors can buy shares at an attractive forward P/E of 16. This is a bargain for a company that analysts expect to grow earnings at an annualized rate of 28% over the next several years. Assuming the stock is still trading at the same valuation, that's enough growth to potentially double your investment in three years.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
- Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $263,993!*
- Apple: if you invested $1,000 when we doubled down in 2008, you’d have $38,523!*
- Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $494,557!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Continue »
*Stock Advisor returns as of April 1, 2025
John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pinterest. The Motley Fool has a disclosure policy.
