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Here's the Latest Trend Pushing Stock Markets Higher

By Dan Caplinger - Updated Feb 5, 2021 at 1:31PM

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All-time records are in sight.

Friday morning brought continuing enthusiasm to Wall Street, as investors remain extremely optimistic about the prospects for the U.S. economy to rebound as the COVID-19 pandemic gradually gets under control. Some market benchmarks reached intraday record territory on solid advances. As of 11:30 a.m. EST, the Dow Jones Industrial Average (^DJI 0.00%) had climbed 107 points to 31,163. The S&P 500 (^GSPC 2.02%) rose 14 points to 3,885, and the Nasdaq Composite (^IXIC 0.00%) was up by 39 points to 13,817.

Investors always like to identify trends that are creating gains for astute investors. One hot area of the market lately has been social media stocks, but you have to look beyond the biggest players in the industry to find the biggest recent success stories. On Friday morning, both Pinterest (PINS 4.61%) and Snap (SNAP 4.78%) saw their shares move higher after reporting solid earnings results, and that could bode well for the two social media companies in their efforts to become more influential members of the industry.

Finger tracing an upward curving line.

Image source: Getty Images.

Stick a pin in it

Shares of Pinterest climbed 5% late Friday morning. The stock had been up as much as 11%, at the open, as investors got their first chance to react to the picture-based social media company's latest results.

Pinterest's numbers looked phenomenal; the company has been taking advantage of greater participation as the COVID-19 pandemic continues. Fourth-quarter revenue was up 76%, capping a year in which sales were up by nearly half. Global monthly active users grew by 37%, with 459 million users now visiting the Pinterest site regularly. Pinterest also made money in the fourth quarter, although its quarterly profit wasn't enough to pull the company out of the red for the full year in 2020.

In particular, Pinterest did well to follow up on some of its biggest strategic initiatives. The company has emphasized international growth, and overseas revenue surged 145% in the fourth quarter and more than doubled for the full year. User counts were up worldwide, but a 67% boost in international revenue per user showed that Pinterest's monetization efforts are going better.

Pinterest sees revenue growth continuing into the first quarter of 2021, with guidance of 70% or more. That could help keep the stock on its upward trajectory well into the new year.

Snap is it

Shares of Snap were up more than 6% on Friday morning, adding to gains that have taken its stock price up sixfold since its March 2020 lows. The parent of Snapchat had encouraging things to say in its fourth-quarter financial report.

Snap enjoyed much the same level of success as Pinterest. Revenue for the fourth quarter was up 62% from year-earlier levels. Snap cut its losses by more than half in the quarter, and it posted a full-year adjusted pre-tax operating profit. Daily active user counts hit 265 million, up 47 million from year-ago levels.

Snap pointed to several favorable trends helping it move forward. The social media giant said that more than 90% of the generation Z population in the U.S. watched Snap's shows and publisher content, while Snapchat members over 35 are also boosting their engagement with the platform. Augmented reality is also taking off, with more than 200 million daily active users participating in it.

Growth is likely to continue, with Snap predicting first-quarter revenue gains of as much as 60%. As the company expands its reach and aims to serve a broader audience, shareholders like what they're seeing from Snap.

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Stocks Mentioned

Snap Inc. Stock Quote
Snap Inc.
$24.54 (4.78%) $1.12
Pinterest Stock Quote
$22.48 (4.61%) $0.99
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$32,223.42 (0.00%) $0.00
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,088.85 (2.02%) $80.84
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,662.79 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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