Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), and LinkedIn (NYSE:LNKD) are clearly positioned as the three leading players in the social-media sector, an area that offers tremendous opportunities for growth in the long term. Each of the three companies have their own unique strengths and weaknesses, so we asked our contributors to share some insights about which one could be a better buy for investors right now.
Tim Brugger (Facebook): A case could be made for any one of the social-media giants, but as a buy and hold growth choice today, Facebook stands head and shoulders above the rest. Facebook stock has been on a nice run as of late, up about 6.5% in the last month alone. The upside for investors is that Facebook's recent share-price pop is just a precursor of things to come.
If there was a negative to Facebook's Q1, it was its significant jump in expenses. Last quarter, their overhead climbed to $2.61 billion, an 83% increase from the year-ago quarter. Naturally, with that kind of bump in costs, operating margins took a hit. They dropped to 26% from last year's 43%. Per Facebook CFO Dave Wehner, investors should expect more of the same, in terms of expenses, this quarter.
So, what's the good news? The jump in expenditures is already beginning to pay off. The costs came, in part, from the testing of Facebook's now widely used, high-fee video ads. COO Sheryl Sandberg wouldn't elaborate, but did say video spots were "taking off."
Another big expenditure was getting Instagram connected with the fast-growing site, rather than Facebook simply testing the waters. That, too, is now off and running, and should begin growing Facebook's top and bottom lines in the coming quarters.
Toss in the revenue potential of the nearly 1 billion monthly average users, or MAUs, of its WhatsApp property, more than 600 million Messenger users, and its Oculus virtual reality headset scheduled to hit the shelves in Q1 of 2016, and Facebook moves to the top of the list.
Jeremy Bowman (Twitter): While both Facebook and LinkedIn's stock have soared since their IPOs, Twitter's story differs. User growth has consistently disappointed Wall Street, and in the wake of CEO Dick Costolo's recent resignation, shares have plummeted to all-time lows.
But in the chaos lies opportunity, and the platform is just as valuable as it has ever been. Now there are signs that the company may be ready to make the changes necessary to unleash Twitter's full power and drive user growth.
Twitter is preparing to launch Project Lightning, a new feature that will deliver event-based, curated content to users through photos and videos. This could follow breaking news as it happens, or a scheduled event like the Oscars. The new content will also be accessible to users who aren't logged in to Twitter, and it can be embedded onto other sites. It's the first sign that Twitter is seriously tackling its noise problem, which is the primary reason the site has had trouble attracting new users.
With co-Founder Jack Dorsey back at the helm as interim CEO, I'd expect to see more such innovative moves out of the company, as the pressure to move from the tired chronological presentation of tweets has reached a boiling point. Making Twitter easier to use will increase engagement and bring in new users, helping the site reach its full potential, and pleasing Wall Street. With the stock already beaten so far down, and the company making long-needed changes, the potential for a sizable pop is real. That's what makes Twitter the best buy of these three stocks today.
Andres Cardenal (LinkedIn). I can totally understand why investors may want to invest in names like Facebook and Twitter, because the two companies stand to benefit substantially from growing online advertising spending for years to come. However, my money is on LinkedIn, as the professional network is the undisputed leader in online recruiting and related services. This is a segment where there is almost no relevant competitor. This looks like a spectacular opportunity over the long term.
LinkedIn's business model is quite diversified, and its different growth venues are expanding at an impressive rate. The talent-solutions segment consists of recruiters and hiring companies that pay LinkedIn to view job candidates. This segment produced 62% of total revenues during the last quarter, and sales grew by an impressive 36% over the year-ago period.
LinkedIn members can opt-in to premium subscriptions to upgrade the service. The division produced 19% of sales during the period, growing by 28%. Marketing solutions, or their online advertising, brought in 19% of total revenues during the last quarter, with sales increasing by 38% year over year.
The company ended the last quarter with 364 million members, a 23% annual increase. LinkedIn currently has 34,764 corporate solutions customers -- a 35% increase in the last quarter. Job seekers and hiring companies are attracting each other to the platform at an amazing speed, and this speaks well to LinkedIn's scale, recognition, and growing relevance.
Technologies are materially changing areas such as recruitment, professional networking, and human resources. LinkedIn is one of the main drivers of that change, and the leading beneficiary from it, so the company offers extraordinary potential for investors.
Andrés Cardenal owns shares of LinkedIn. Jeremy Bowman has no position in any stocks mentioned. Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook, LinkedIn, and Twitter. The Motley Fool owns shares of Facebook, LinkedIn, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.