A social networking service is an internet-based platform used to build social relationships between people. According to Research and Markets, the global social networking platforms industry is expected to grow at a CAGR of 25.38% between 2021 and 2026, reaching $939.68 billion in the terminal year. Increasing penetration of electronic devices, including mobile, tablets, and others, along with rising data consumption are projected to be the key growth drivers.

In addition, the number of social network users is estimated to increase to 4.41 billion by 2025 compared to 3.6 billion in 2020. This implies obvious long-term benefits for companies that operate in the given industry. 

With this in mind, today, I will analyze and compare two social media stocks: Meta Platforms, Inc. (FB) and Snap Inc. (SNAP), to see which one looks best for 2022.

Founded in 2004, Meta Platforms (formerly known as Facebook) is a global social technology company that develops products, allowing users to connect through smartphones, PCs, and other devices. The company operates across two business segments: Family of Apps and Facebook Reality Labs. Based in Santa Monica, California, Snap is a social media company that helps people communicate through its camera application, known as Snapchat. 

Recent Quarterly Performance & Analysts Estimates 

On February 2nd, FB delivered mixed Q4 earnings. After the report was released, shares of Meta Platforms plunged about 23% during the after-hours trading session due to the profit miss and weak revenue guidance. The company's total revenue for its fiscal fourth quarter rose 20.0% year-over-year to $33.67 billion, driven primarily by a 20% YoY increase in advertising revenue. Also, the company surpassed the Wall Street consensus revenue projections by $230 million. FB's daily active users were up 5% YoY to 1.93 billion on average for December 2021, while monthly active users increased 4% YoY to 2.91 billion as of December 31st, 2021.  

However, the company’s total costs and expenses came in 38% higher year-over-year at $21.09 billion, leading to an 8% year-over-year decrease in net income to $10.29 billion. As a result, Meta Platforms’ Q4 GAAP EPS was $3.67, missing estimates by $0.16.

Finally, the company guided first-quarter revenue of $27 - $29 billion, implying just 3%-11% year-over-year growth. For the first quarter, analysts expect Meta's EPS to stand at $2.67, representing a 19.07% YoY decrease. However, an $28.62 billion average revenue estimate for the next quarter shows a 9.36% growth year-over-year. 

On February 3rd, Snap announced its fourth-quarter earnings report. The company delivered a higher-than-expected top and bottom line, leading to its stock price appreciation by about 25% during Thursday’s post-market trading session. So, let’s analyze SNAP’s Q4 report in-depth.  

For its fiscal fourth quarter ended December 31st, 2021, the company's revenue climbed 42.7% year-over-year to $1.3 billion. Also, the company was able to beat the Wall Street consensus revenue estimates by $100 million. Besides, SNAP reported Non-GAAP EPS of $0.22, easily beating Wall Street’s estimates by $0.12.

It is also important to note that Snap’s daily active users increased 20% YoY to 319 million. The average revenue per active user was also improved, coming in at $4.06 in Q4 versus $3.49 as of 3Q21. Also, the company reported a first-quarter of positive net income as a public company of $23 million. 

For the next quarter, analysts expect SNAP’s EPS to come in at $0.01. Additionally, Wall Street expects the company's revenue to increase by 32.16% year-over-year to $1.02 billion in the first fiscal quarter of 2022. 

Comparative Valuation

In terms of Forward P/E, SNAP is currently trading at 46.57x, which is higher than FB, whose multiple is currently 17.94x. When it comes to the FWD EV/Sales multiple, SNAP’s multiple of 9.23x is 42.43% higher than FB’s 6.48x. 

However, SNAP is projected to demonstrate higher forward revenue and EBITDA growth rates of 46.66% and 249.32%, respectively. These growth numbers exceed the FB figures of 22.62% and 17.08%, respectively. 

The Bottom Line 

Putting it all together, I believe that SNAP is a better buy for 2022. Meta is currently facing a lot of challenges, which could negatively affect its share price. At the same time, Snap reported a superior fourth-quarter report, topping analysts’ estimates. In addition, the company delivered higher DAUs growth, improving higher average revenue per active user as well. Although SNAP trades with a premium compared to its peer FB, SNAP’s superior FWD revenue and EBITDA growth rates could somewhat justify its relatively overvalued conditions. 

FB shares were trading at $232.47 per share on Friday morning, down $5.29 (-2.22%). Year-to-date, FB has declined -30.88%, versus a -6.24% rise in the benchmark S&P 500 index during the same period.

Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.

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