10 Cheap Social Media Stocks to Buy According to Hedge Funds

In this article, we discuss 10 cheap social media stocks to buy according to hedge funds.

In recent years, social media has emerged as a potent marketing tool for businesses of all sizes due to its diverse platforms and extensive reach. Nonetheless, social media trends can be fleeting, particularly as technology progresses and various platforms fluctuate in popularity. Staying up-to-date with trends is crucial in the world of social media. In the coming year, short-form videos, increased video budgets, content creation, and influencer marketing are expected to dominate. To safeguard content, data, and people on social media, Market Research Future’s extensive research report predicts that the global social media security market will experience significant growth during the review period of 2022 to 2030, with a growth rate of approximately 16.40%. The market is expected to reach a size of around $3863.45 million by the end of 2030.

According to Insider Intelligence’s forecast, ad revenue growth will bounce back to 8.2% this year, following a historic 2.0% drop in 2022. Nevertheless, this growth will not be sufficient to reverse the declining share of ad revenue. The firm’s projection shows that Meta Platforms, Inc. (NASDAQ:META)’s portion of global digital ad spending reached its highest point of 22.0% in 2021 but will decrease to 19.4% this year. Facebook’s worldwide monthly users will only increase by 0.3% this year, and for the first time, its share of internet users will fall below 45%. Additionally, Instagram’s ability to compensate for Facebook’s losses is decreasing, as its monthly user base will grow by 4.7% this year, but its share of global internet users will only increase by less than one percentage point, to 28.7%.

In 2023, the advertising revenue for TikTok and Douyin, which are social platforms owned by ByteDance, is expected to increase by 24.5%. As a result, ByteDance’s share of worldwide digital advertising expenditure is predicted to reach 5.8%, which is more significant than the combined share of LinkedIn, Snapchat, Twitter, and YouTube. Moreover, by 2023, the total monthly user base for both apps is estimated to reach 1.70 billion users, which will make up 36.5% of all internet users globally and 45.2% of all social network users. Due to the chaotic atmosphere on Twitter, many users are abandoning the platform and opting for alternative ones that promote free conversations. This hunt for the next significant social app for Generation Z is fueling the quick expansion of platforms like BeReal and Gas, which serves as a caution for Snapchat and TikTok. If US lawmakers or regulators don’t impede its growth, TikTok is set to join Facebook and Instagram as the third social network to exceed 100 million monthly users in the US by 2023.

Some of the best social media stocks to invest in include Microsoft Corporation (NASDAQ:MSFT), Match Group, Inc. (NASDAQ:MTCH), and Meta Platforms, Inc. (NASDAQ:META). 

Our Methodology 

We chose the top cheap social media stocks based on overall hedge fund sentiment, with P/E ratios of less than or close to 29 (Software – Internet average industry PE ratio is 29) as of April 4. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the fourth quarter of 2022. The list is arranged in ascending order of the P/R ratio for each stock. 

Photo by geo uc on Unsplash

Cheap Social Media Stocks to Buy According to Hedge Funds

10. Hello Group Inc. (NASDAQ:MOMO)

Number of Hedge Fund Holders: 20

P/E Ratio as of April 4: 8.38

Hello Group Inc. (NASDAQ:MOMO) is a company that offers social and entertainment services through mobile devices in China. The company manages the Momo platform, which comprises a mobile application, as well as related properties, features, functionalities, tools, and services. On March 16, Hello Group Inc. (NASDAQ:MOMO) reported a Q4 non-GAAP EPADS of $0.36 and a revenue of $465.8 million, outperforming Wall Street estimates by $0.08 and $2.53 million, respectively. Hello Group Inc. (NASDAQ:MOMO) declared a $0.72 per share annual dividend on March 21, in line with previous. The dividend is payable on May 22, to shareholders of record on April 28. 

On February 16,  Morgan Stanley downgraded Hello Group Inc. (NASDAQ:MOMO) from Overweight to Equal Weight, while increasing its price target from $9 to $12. The company is expected to benefit from the reopening of mobility and dating apps in China, but the firm believes that the stock’s current price is fairly valued compared to its peers, especially after experiencing a more than 100% increase over the past three months. To demonstrate growth acceleration beyond the reopening, Morgan Stanley suggested that Hello Group Inc. (NASDAQ:MOMO) needs to make significant product breakthroughs.

According to Insider Monkey’s fourth quarter database, 20 hedge funds were long Hello Group Inc. (NASDAQ:MOMO), compared to 17 funds in the last quarter. The combined stakes held by elite funds in Q4 2022 amounted to $244 million, up from $114.4 million in Q3. 

Like Microsoft Corporation (NASDAQ:MSFT), Match Group, Inc. (NASDAQ:MTCH), and Meta Platforms, Inc. (NASDAQ:META), Hello Group Inc. (NASDAQ:MOMO) is one of the best social media stocks according to hedge funds. 

9. Yalla Group Limited (NYSE:YALA)

Number of Hedge Fund Holders: 4

P/E Ratio as of April 4: 8.50

Yalla Group Limited (NYSE:YALA) runs a social networking and entertainment platform called Yalla, which focuses on voice communication. The platform is primarily used in the Middle East and North Africa, providing services such as group chatting and games. It also offers virtual items for sale and upgrade services. The company was established in 2016 and is based in Dubai, United Arab Emirates. On March 13, Yalla Group Limited (NYSE:YALA) reported a revenue of $75.11 million, up 11.2% year-over-year, beating market estimates by $0.26 million. As of December 31, 2022, the company had cash and cash equivalents of $407.3 million, compared to $391.2 million as of September 30, 2022. For Q1 2023, Yalla Group Limited (NYSE:YALA) expects revenues to be between $68.0 million and $75.0 million. It is one of the best cheap social media stocks to invest in. 

According to Insider Monkey’s fourth quarter database, 4 hedge funds were long Yalla Group Limited (NYSE:YALA), with combined stakes worth $3.8 million. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 164,889 shares worth $577,112. 

8. JOYY Inc. (NASDAQ:YY)

Number of Hedge Fund Holders: 20

P/E Ratio as of April 4: 19.93

JOYY Inc. (NASDAQ:YY) manages social media platforms that provide users with an interactive and immersive experience through video and audio-based social platforms. The company runs Bigo Live, which is a platform for live streaming that enables users to broadcast their talent, connect with others globally, and socialize. Likee is another platform that focuses on short-form videos for users to create content. Additionally, Hago is a casual game-based social platform, and JOYY Inc. (NASDAQ:YY)’s imo is a chat and instant messaging application that offers various features such as video calls, group calls, and document sharing. It is one of the best cheap social media stocks to watch. 

On March 16, JOYY Inc. (NASDAQ:YY) reported a Q4 non-GAAP EPADS of $0.65, beating market estimates by $0.36. The revenue of $604.9 million came in-line with Wall Street consensus. For the first quarter of 2023, the company expects net revenues to be between $552 million and $570 million, versus a consensus of $593.50 million.

Benchmark analyst Fawne Jiang reiterated a Buy rating on JOYY Inc. (NASDAQ:YY) but lowered the firm’s price target on the shares to $49 from $62 on March 17. The company’s Q4 results were reported as “moderately above-expectation,” but there is still a lack of visibility for FY23, leading the firm to adjust its estimates cautiously. The analyst explained that this approach was taken due to the uncertainty surrounding the company’s future performance.

According to Insider Monkey’s fourth quarter database, 20 hedge funds were bullish on JOYY Inc. (NASDAQ:YY), compared to 17 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is a significant position holder in the company, with 1.2 million shares worth $39.2 million. 

Here is what Tao Value had to say about JOYY Inc. (NASDAQ:YY) in their Q1 2021 investor letter:

“We exited YY after 3.5 years near an all-time high. The annualized return (13~%) is below expectation, especially compared to founder CEO David Xueling Li’s net worth (mainly in YY shares) ballooning from $1.1B in 2018 to $2.3B in 2021. On value realization, I think YY did a good job, acquiring Bigo, spinning off then selling Huya & selling YY Live to Baidu. But as a minority shareholder, we were treated unfairly. E.g. the Bigo deal (for buying shares from executives including Li) was done by YY stock when the price was severely depressed, causing significant dilution for our ownership. We learned our lessons and will evaluate more rigorously in management’s partnership mindset in the future.”

7. Tencent Holdings Limited (OTC:TCEHY)

Number of Hedge Fund Holders: N/A

P/E Ratio as of April 4: 18.56

Tencent Holdings Limited (OTC:TCEHY) is an investment holding company that delivers value-added services and online advertising services in China and internationally. Its operations are divided into various segments, including VAS, Online Advertising, FinTech and Business Services, and Others. The company’s consumer business provides communication services, such as instant messaging and social networking, as well as digital content like online games, videos, live streaming, news, music, fintech, and literature. Tencent Holdings Limited (OTC:TCEHY) is one of the top cheap social media stocks to invest in. 

On April 3, Loop Capital upgraded Tencent Holdings Limited (OTC:TCEHY) to Buy from Hold, with a price target of HK$455, up from HK$345. The firm noted that both the company’s core gaming and payments engines show promising signs for valuation, as well as a positive outlook for advertising revenue growth. With revenue growth expected to increase in Tencent Holdings Limited (OTC:TCEHY)’s core segments, the stock is expected to perform well due to the predicted improvement of macroeconomic conditions, as stated in the research note by Loop Capital. 

6. NetEase, Inc. (NASDAQ:NTES)

Number of Hedge Fund Holders: 31

P/E Ratio as of April 4: 20.70

NetEase, Inc. (NASDAQ:NTES) offers online services including diverse content, community, communication, and commerce in China and internationally. The company operates via three segments – Online Game Services, Youdao, Cloud Music, and Innovative Businesses and Others. 

On February 28, JPMorgan analyst Daniel Chen upgraded NetEase, Inc. (NASDAQ:NTES) to Overweight from Neutral with a price target of $100, up from $85. Despite the company’s share price dropping by 8% since its Q4 report, the analyst believes that NetEase, Inc. (NASDAQ:NTES) is set to enter a new game launch cycle in March, creating a buying opportunity for investors. Additionally, the firm is more positive about the sustainability of Eggy Party, following its strong performance post the Chinese New Year.

According to Insider Monkey’s fourth quarter database, 31 hedge funds were bullish on NetEase, Inc. (NASDAQ:NTES), compared to 24 funds in the prior quarter. William B. Gray’s Orbis Investment Management is the largest stakeholder of the company, with 4.60 million shares worth $334.3 million. 

In addition to Microsoft Corporation (NASDAQ:MSFT), Match Group, Inc. (NASDAQ:MTCH), and Meta Platforms, Inc. (NASDAQ:META), elite hedge funds are piling into NetEase, Inc. (NASDAQ:NTES). 

5. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 152

P/E Ratio as of April 4: 22.97

Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, operates several social media platforms. The most well-known of these include YouTube, Blogger, and Google Meet. Formerly, the company operated Google+, which was a social networking platform that aimed to compete with Facebook but was shut down in 2019. Alphabet Inc. (NASDAQ:GOOG) is one of the best cheap social media stocks to invest in. 

On March 20, Stifel analyst Mark Kelley initiated coverage of Alphabet Inc. (NASDAQ:GOOG) with a Buy rating and a price target of $130. According to the analyst, early demos of Microsoft’s Bing via OpenAI have been impressive while Google’s demos have been disappointing. However, the analyst does not expect a significant change in consumer behavior or spending on search ads. Alphabet Inc. (NASDAQ:GOOG) has been focusing on AI for some time, and the analyst predicts that more AI-based searches may slightly affect the company’s margins. The firm believes that Alphabet Inc. (NASDAQ:GOOG) will take proactive measures to satisfy regulators before the DOJ case is resolved. Additionally, Kelley sees a considerable opportunity for YouTube and YouTube TV.

According to Insider Monkey’s fourth quarter database, 152 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG), compared to 156 funds in the prior quarter. Chris Hohn’s TCI Fund Management is the largest stakeholder of the company. 

Weitz Partners III Opportunity Fund made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q4 2022 investor letter:

“Unfortunately, the performance story of the year is told by the Fund’s detractors. Now, weakening ad spending across all channels has added insult to injury, and concerns have spread to the other dominant digital ad player, Alphabet Inc. (NASDAQ:GOOG) — parent of Google and YouTube.

Meta, Alphabet, Amazon and CarMax were all top detractors for the quarter and calendar year periods (FIS and Liberty Broadband, respectively, complete the quarterly and calendar-year detractor lists.) To varying degrees, each is managing through cyclical challenges during a period of substantial investor pessimism. Drawdowns of this magnitude are painful, and it may be prudent for management to moderate the pace of some investments, but we remain encouraged by their long-term focus. In the short run, cutting spending indiscriminately to “defend earnings” may lessen the pain of a drawdown, but it seldom grows a company’s business value — the ultimate prize.”

4. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 194

P/E Ratio as of April 4: 24.25

Meta Platforms, Inc. (NASDAQ:META)’s Family of Apps segment offers Facebook, Instagram, Messenger, and WhatsApp. These applications enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It is one of the best cheap social media stocks to invest in. 

On March 30, Stephen Ju, an analyst at Credit Suisse, increased the firm’s price target for Meta Platforms, Inc. (NASDAQ:META) from $220 to $251 and maintained an Outperform rating on the shares prior to the release of quarterly results. According to the firm, Meta Platforms, Inc. (NASDAQ:META) has already announced two rounds of cost cuts, and the investment rationale now depends on revenue growth outperformance. Credit Suisse highlighted that Meta has made up for the $10 billion in lost revenue after ATT by using Click-to-Message and believes there is a lot of potential for revenue growth for both Messenger and WhatsApp. In addition, the firm noted that Instagram’s recent announcement of showing ads within search results can bring in a new stream of high-margin revenue, which could potentially reach close to $1 billion over the next few years.

According to Insider Monkey’s fourth quarter database, 194 hedge funds were long Meta Platforms, Inc. (NASDAQ:META), compared to 177 funds in the prior quarter. Boykin Curry’s Eagle Capital Management is the largest stakeholder of the company, with more than 9 million shares worth $1 billion. 

Davis New York Venture Fund made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its 2022 annual investor letter:

“As both a “blue chip of tomorrow” and a company languishing under “headline risk,” our investment in Meta Platforms, Inc. (NASDAQ:META) reflects these two investment themes. With more than three billion daily users across its three platforms (Facebook, Instagram and WhatsApp), Meta has more users than almost any company in history. Despite this success, Meta currently languishes under a cloud of skepticism concerning two issues: competition from other services, such as TikTok, and significantly increased spending both on artificial intelligence (AI) and speculative new ventures including virtual reality and augmented reality (often referred to as the metaverse).

Starting with competition, despite the drumbeat of negative headlines, which leads most investors to assume that Facebook’s core businesses are shrinking, Figure 9 shows continued growth in the number of users on their core service, including Facebook (green bars), as well as the company’s entire family of applications.

The gold line in Figure 9 shows Meta’s ad revenue per user up more than 30% since 2019 but down from last year’s peak. While we find this decline concerning, it is hardly surprising given the slowing economy and time needed for Facebook to adjust to changes made by Apple—somewhat disingenuously in the name of privacy—that reduced the efficacy of some of Meta’s advertising while favoring Apple. We highlight this decline as a risk but believe it will prove temporary. We think that Meta’s growing user base as well as the continued growth in the amount of time users are spending on these platforms is a far more important indicator of Meta’s relevance and value…” (Click here to view the full text)

3. PubMatic, Inc. (NASDAQ:PUBM)

Number of Hedge Fund Holders: 12

P/E Ratio as of April 4: 27.45

PubMatic, Inc. (NASDAQ:PUBM) provides a cloud infrastructure platform that allows real-time programmatic advertising transactions for Internet content creators and advertisers worldwide. The company’s platform supports a range of ad formats and digital device types, including mobile app, mobile web, desktop, display, video, over-the-top, connected television, and media. It is one of the best cheap social media stocks to monitor. On February 28, PubMatic, Inc. (NASDAQ:PUBM) announced that its board of directors authorized a share repurchase program. Through the program, the company may repurchase up to $75 million of Class A common stock through the end of 2024.

Matthew Swanson, an analyst at RBC Capital, maintained an Outperform rating on PubMatic, Inc. (NASDAQ:PUBM) but reduced the price target on the shares from $24 to $20 on March 1. Swanson noted that the company’s Q4 performance was affected by macro factors more than expected. Although demand has since improved, the management is still wary of the future due to a slower macro recovery compared to its peers. PubMatic, Inc. (NASDAQ:PUBM) did not provide revenue guidance for the year, but they are taking measures to ensure profitability. 

According to Insider Monkey’s fourth quarter database, 12 hedge funds were long PubMatic, Inc. (NASDAQ:PUBM), and Cliff Asness’ AQR Capital Management is a significant stakeholder of the company, with 33,812 shares worth $433,132. 

2. Match Group, Inc. (NASDAQ:MTCH)

Number of Hedge Fund Holders: 54

P/E Ratio as of April 4: 28.81

Match Group, Inc. (NASDAQ:MTCH) offers dating services globally through a range of apps and websites. The company owns and manages a collection of brands such as Tinder, Match, The League, Azar, Meetic, OkCupid, Hinge, Pairs, PlentyOfFish, and Hakuna, among others. Match Group, Inc. (NASDAQ:MTCH) was established in 1986 and is headquartered in Dallas, Texas. 

The company expects to achieve a year-over-year growth of 5% to 10% in overall revenue and Tinder’s direct revenue for the entire year 2023. Match Group, Inc. (NASDAQ:MTCH) anticipates that its revenue growth will gradually increase from the levels of the fourth quarter of 2022 and will reach double digits by the fourth quarter of 2023. Projections indicate that Hinge will generate approximately $400 million in direct revenue during 2023. It is one of the best cheap social media stocks to invest in. 

On March 30, Citi maintained a Neutral rating on Match Group, Inc. (NASDAQ:MTCH) and lowered the firm’s price target on the shares to $40 from $54. Citi’s first monthly online dating data tracker revealed that Bumble and Hinge are experiencing significant growth while Tinder is facing more challenges. The company’s target was trimmed due to the continued decline in Tinder’s data, as reported by SensorTower. Citi’s note added that Tinder witnessed a decline in active users, time spent, and downloads during Q1.

According to Insider Monkey’s fourth quarter database, 54 hedge funds held stakes worth $730.3 million in Match Group, Inc. (NASDAQ:MTCH), compared to 54 funds in the prior quarter worth $621 million. 

RGA Investment Advisors made the following comment about Match Group, Inc. (NASDAQ:MTCH) in its Q4 2022 investor letter:

“Match Group, Inc. (NASDAQ:MTCH), a long-term holding of ours offers an important illustrative example of these effects. Tinder grew reported revenues 6% year-over-year, accelerating a debate about whether this particular asset has reached a plateau in its growth curve; however, revenues grew 16% on an FX neutral basis. Has this asset stalled or is it a mid-teens grower? Other factors will determine the one true answer to this question, though FX and the stated headline make the answer seem obvious when it is not. When foreign exchange movements are modest, people tend to focus more on FX neutral assuming those changes will normalize over time, yet when movements are extreme the headline takes prominence.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 259

P/E Ratio as of April 4: 32.18

Microsoft Corporation (NASDAQ:MSFT)’s social media applications include LinkedIn, Yammer, Microsoft Teams, Skype, Microsoft Stream, and Flipgrid. It is one of the best social media stocks to invest in. According to Morgan Stanley, the most recent CIO survey suggests that IT spending will remain stable and Microsoft Corporation (NASDAQ:MSFT) has favorable fundamentals. The survey showed several forward-looking indicators that indicate Microsoft’s strong relative position if 2023 budgets come under pressure. The company has widened its lead in expected IT wallet share gains. Based on the survey, Morgan Stanley believes that Microsoft Corporation (NASDAQ:MSFT) is “increasingly well positioned” and reiterated an Overweight rating with a $307 price target on the shares on March 30. 

According to Insider Monkey’s fourth quarter database, 259 hedge funds were bullish on Microsoft Corporation (NASDAQ:MSFT), compared to 269 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the biggest position holder in the company, with 39.2 million shares worth $9.4 billion. 

Diamond Hill Large Cap Concentrated Strategy made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2022 investor letter:

“Other bottom contributors to return included railroad operator Union Pacific, software and IT services provider Microsoft Corporation (NASDAQ:MSFT), and banking and financial services company Truist Financial. Union Pacific and Microsoft, though among our bottom contributors, still contributed positively to performance in Q4 as their share prices rose 7% and 3%, respectively. Truist’s stock ended flat in Q4.”

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also check out 10 Most Profitable Small Businesses in 2023 and 12 Best Dow Stocks to Buy Now.

Suggested articles:

• Cathie Wood’s Stock Portfolio: 2023 Stock Picks
• 12 Best WallStreetBets Stocks To Buy Now
• 10 Best April Dividend Stocks To Buy

Disclosure: None. 10 Cheap Social Media Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.