Will Meta Platform’s Threads Upend the Social Media Landscape?

The release of Meta Platform’s (META) Threads app is a direct competitor to Twitter, which has struggled since Elon Musk purchased the company.  The Threads app also threatens other social media platforms, such as Snap (SNAP) and Pinterest (PINS), notably after Threads amassed 100 million users within a week of its launch.  The smaller platforms may struggle to remain relevant in the highly competitive market for online advertising. 

Shares of Meta Platforms have surged +157% this year, second only to Nvidia among stocks in the Nasdaq 100. Meta Platform’s net earnings per share are expected to grow +40% this year, outpacing estimates for Snap and Pinterest.  Freedom Capital Markets said, “It’s hard to make a case for owning Snap or Pinterest over Meta Platforms since there’s no arguing that Meta is the strongest in the sector and the one that’s most likely to get stronger.”   

Meta Platform’s Threads app, a spinoff from Instagram that uses people’s accounts for that service, could give a boost to the company’s revenue growth.  Evercore ISI said Threads could reach close to 200 million daily active users and generate about $8 billion in annual revenue over the next two years.  The new app’s launch has benefited from Meta Platform’s immense reach, as Instagram alone has over one billion regular users.

Despite this year’s surge in Mata Platform’s share price, the stock trades around 21 times forward earnings, below both its 10-year average and the Nasdaq 100 Stock Index ($IUXX) (QQQ).  The valuation is a sizable discount to the multiples of both Snap and Pinterest. Gabelli Funds said, “There’s a pretty nice setup for Meta given its valuation and growth prospects, and while it’s still early for Threads, something would really have to change for us to consider owning Snap or Pinterest instead.”

The user base of Meta Platforms is several times larger than that of Snap or Pinterest, as is its average revenue per user.  According to Bloomberg Intelligence data, Meta Platforms had nearly 33% of the market share for global internet advertising revenue in 2022.  While that was below Alphabet’s more than 50% of the market, it was well above the 1.3% for Snap and 0.8% of the market for Pinterest. Meanwhile, Twitter, which has more than 300 million subscribers, has struggled to maintain its relevance and has seen its advertising revenue decline by about 50% as users seek alternatives, like Threads. 

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.