Social media continues to be extremely popular. Today, five billion people — more than half the world’s population — regularly access social media sites. The average person visits seven different social media sites each month. Use of social media is even greater among young people, with 93% of teenagers in the U.S. saying they regularly access social media.
Given the popularity of social media platforms, one might assume that stocks of social media companies would be great investments.
Sadly, no.
Most social media stocks peaked in 2021 during the pandemic when people were sheltering in-place at home. Since then, social media companies have struggled with a slump in online advertising that is only now starting to recover.
The result is that most social media companies have struggled in recent years and their share prices have fallen steeply from the heights seen in 2021 during the last bull market. Here are three social media stocks to sell in July before they crash and burn.
Trump Media & Technology Group (DJT)
It’s gotten a lift since the first presidential debate, but make no mistake. Trump Media & Technology Group (NASDAQ:DJT) remains extremely volatile and prone to erratic price movements. To give a sense of the volatility, consider that while DJT stock is up 90% year to date, it is trading about nearly 60% below its 52-week high. And Trump Media & Technology Group has only been a publicly traded stock since March of this year.
The company runs Truth Social, a social media platform that is modeled after X, formerly Twitter, and popular among the former president’s supporters. However, the company behind the social media platform has some serious financial problems.
In its first print as a publicly traded company, Trump Media reported a net loss of $327.6 million on less than $1 million in revenue. Some analysts describe DJT as a “meme stock.”
The volatility in Trump Media’s stock could worsen as we get closer to the presidential election this November, making it a social media stock to sell.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) lost a lot of goodwill with investors after its first-quarter earnings print. The company’s stock plunged 16% after the technology giant behind social media platforms such as Facebook and Instagram delivered forward guidance that underwhelmed Wall Street. Sadly, the outlook overshadowed what was otherwise a strong quarterly print from the company.
Meta reported EPS of $4.71 versus $4.32 that was expected among analysts. Revenue totaled $36.46 billion compared to $36.16 billion that was expected. However, Meta said that it expects sales in the current second quarter of $36.5 billion to $39 billion.
That fell short of the consensus estimate of $38.3 billion among analysts.
CEO Mark Zuckerberg said Meta’s capital expenditures for 2024 are anticipated to be $40 billion, an increase from a previous forecast of $30 billion.
The increased capital spending is mostly due to growing outlays on artificial intelligence technologies being developed through the company’s Reality Labs unit. Since 2020, Reality Labs has lost $45 billion for the company. META stock is up 46% this year, but more volatility could be ahead if the company fails to meet Wall Street’s expectations and the heavy spending continues.
Snap (SNAP)
Year-to-date, Snap (NYSE:SNAP), the company behind social media platform Snapchat, is down o.74%, badly trailing the benchmark S&P 500‘s gain of 15%. SNAP stock is trading 80% lower than its all-time high reached in 2021 during the depths of the Covid-19 pandemic, when social media sites and the company’s behind them were flourishing.
Despite several attempts at boosting its share price, Snap has not been able to recover.
The stock has declined due to a series of poor earnings that have resulted from a downturn in digital advertising. Prior to this year, Snap had reported six consecutive quarters of sales declines.
Earlier this year, Snap announced that it was cutting 10% of its global workforce, which equates to about 500 employees. While the company’s earnings print for this year’s first quarter showed improvement, its shares continue to lag the market, making Snap a social media stock to sell.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of the publication, the responsible editor held a LONG position in SNAP.