In this article, we will look at the 7 Cheap Social Media Stocks to Invest in. Let’s look at where JOYY Inc. (YY) stands against other cheap reliable stocks.
Social Media Platforms for News Consumption
Digital sources, especially social media, have become a critical part of the news diets of Americans. According to the Pew Research Center, more than half of US adults (54%) sometimes get news from social media. This number has risen compared to the past few years. Facebook and YouTube are the most popular places for US citizens to consume news, especially election-related updates, just days before Americans set out to choose their next president. Around a third of US adults say they regularly absorb news from these two sites.
However, despite having relatively small overall audiences, some social media platforms are becoming increasingly popular news destinations among their users. For instance, around 59% of X users say that they get news from the platform, while 57% of Truth Social users say the same, which is the site owned by former POTUS Donald Trump.
In contrast, only 14% of LinkedIn users regularly get news from the platform. TikTok is another social media platform gaining increasing popularity, especially among the younger generation. Around 52% of TikTok users get regular news from the platform. This number grew from 43% in 2023 and just 22% in 2020. YouTube and Instagram are also gaining more followers, highlighting the increasing role of social media platforms in disseminating news. These trends hold special significance in the current US landscape, with presidential campaigns in full swing.
The US Election Campaign and Social Media
Platforms like Facebook, Instagram, and X are increasingly developing new ways to market political campaigns, allowing more and more voters and candidates to interact. These platforms have also reversed their ban on former POTUS Donald Trump since he is once again back in the presidential race. However, the circumstances pose a serious responsibility on such social media platforms: a legal obligation to offer a safe environment to their users amid expectations that they provide former POTUS Trump a platform that is not restricted or over-regulated for their campaigns, especially when compared to his political opponents.
Social media is thus being used as one of the most powerful tools in a presidential campaign’s toolbox. However, the use of these platforms is also raising concerns surrounding the echo chamber and bandwagon effect. According to research published in the Proceedings of the National Academy of Sciences in 2021, content curation by social media platforms created political echo chambers. These chambers are a natural part of a social media platform’s impersonal algorithm that shows users the content they are interested in by analyzing their engagement. Thus, a platform is very likely to continually recommend left-leaning content to a politically left-leaning person, and vice versa.
Social media echo chambers, therefore, lead to the bandwagon effect, reinforcing and amplifying mass media’s messages and affecting the public’s perception of candidates and their operations. Such happenings allow misinformation to spread quickly and run rampant. According to statistics by the Pew Research Center comparing the political perceptions of 2016 and 2020, the number of people who found social media-led political discussions “interesting and informative” fell from 35% in 2016 to 26% in 2020.
However, these drawbacks do not undermine the critical importance of social media platforms in disseminating news, swaying public perception, and acting as a tool in the current politically charged landscape.
Our Methodology
We first consulted ETFs and online rankings to create an initial list of 20 publicly traded social media companies with forward P/E ratios of less than 20. From this list, we selected the 7 stocks with the highest number of hedge fund holders as of Q2 2024 and used that as our ranking metric.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Photo by Jakob Owens on Unsplash
JOYY Inc. (NASDAQ:YY)
Forward P/E: 9.96
Analysts’ Upside Potential: 6.38%
Number of Hedge Fund Holders: 21
JOYY (NASDAQ:YY) is a global technology company that operates several social products, including Bigo Live for live streaming, Hago for multiplayer social networking, Likee for short-form videos, an instant messaging product, and others. It operates through two segments: BIGO and All Other. The BIGO segment encompasses several social entertainment platforms, including Bigo Live, imo, Likee, and others. The All Other segment manages Hago, Shopline, and a particular audio live-streaming platform.
Bigo Live allows users to socialize, connect with other users, share their life moments, and show their talents. Likee allows users to create, discover, and share short-form videos. It also features all-in-one video tools, such as special effects, filters, and AI-enabled personalized feeds. Hago, in contrast, offers casual games and integrated social features to its users, such as audio and video multiuser chatrooms and 3D virtual interactive party games.
JOYY (NASDAQ:YY) is generating robust cash flow through its businesses, allowing it to focus on its near-term core strategy while prioritizing long-term growth prospects. It is advancing continuous product innovation and focusing on optimizing user social interactions and content experience to improve user satisfaction. The company is experiencing significant growth potential in its global business and is leveraging its user-centric approach and product capabilities to boost the expansion of its global user community.
It is also focusing on innovative features directly affecting user interaction with its platform, such as Bigo Live’s Real Match feature which allows users space to meet new people. Real Match’s daily active users have nearly doubled in the past six months, exceeding 20% and boosting Bigo Live’s registration, payment conversion, and overall ROI. Such improvements give the company a competitive edge.
The company is also focusing on enhancing growth with operational efficiency to boost expansion in group and product profitability. The stock sports a consensus Buy rating among analysts, with its median price target implying an upside of 6.38% from current levels.
Overall, YY ranks 4th among the cheap social media stocks to invest in. While we acknowledge the potential of cheap social media companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than YY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.