We are social animals. But what exactly does that mean when we can’t dine with friends at restaurants, share stories at the water cooler, or attend birthday parties, weddings, and family reunions?
It means we find other ways to share our stories, thoughts, and opinions. Fortunately, we live in a time where even if we’re required to be socially distant, we have the technology to stay connected by digital means. And that is exactly what we’re doing.
Depending on which source you’re looking at, internet traffic has surged anywhere from 25% to over 100% during social distancing. Gaming has seen a huge spike. And, Facebook (FB) saw average traffic jump 27% in the first few weeks after the virus came to the U.S.
Digital platforms, like FB, that emphasize pictures and video, as opposed to the written word, have experienced the biggest increases, as we want to “see” what our friends and family are up to. Some of my friends are now on FB doing regular video calls with loved ones they can’t visit, such as those in retirement homes. This is something that, even a few months ago, just didn’t happen.
The sharing trend has been growing for years, but I believe the boost it received recently will stick with us for years to come. And, certain companies will see outsized benefits from this trend as it accelerates.
The Snapchat (SNAP) website describes itself as “a camera company,” and, fits squarely within the trend of sharing via video and pictures.
SNAP grew revenue in its latest quarter, which closed before COVID-19, at 44% year-over-year increase to $561 million. The number of average daily users rose by 17% to over 218 million.
As SNAP grows, it is looking to monetize users, and the company showed promising signs of this in the latest quarter. Snapchat announced its revenue from commercials tripled year-over-year, and that it signed its first two commercial users of its “Scan camera technology”, Mcdonalds (MCD) and Coca-Cola (KO).
As both user growth and monetization are accelerating, the stock could see a boost from the recent uptick in the sharing trend.
GoPro (GPRO), which manufactures cameras and accessories, is another company that should see a boost from the upward sloping sharing trend.
The company saw 40% year-over-year revenue growth in its latest quarter, although once again, this was before the forced isolation brought on by COVID-19. Q4 net income was $0.65 per share on overall income of $96 million.
GPRO’s increase in revenue and income in the quarter came as the company was able to decrease operating expenses 3% year-over-year. Adjusted EBITDA for full year 2019 came in at $72 million, a 230% year-over-year increase over 2018.
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GPRO introduced two new flagship products in the fall of 2019, and has been monetizing its high margin “Plus” subscription service, as well as an improved app. The company believes this monetization strategy should grow both margins and EPS in 2020.
Finally, let me return to the company I mentioned earlier in this article that is seeing a big boost in user traffic, Facebook (FB).
FB has managed to capture a wide demographic range across its multiple platforms. The main Facebook platform is bringing in “older” users, like me, while Instagram has captured the younger demographic for which the main platform is not sufficiently “hip.”
FB is one of the few companies that has been able to capture the sharing trend with adults who need to connect with family and friends they once saw over dinner and drinks, as well as kids who are now no longer attending school.
In its latest quarter the company reported ad revenue increased 25% year-over-year to $20.7 billion. And, while ad revenue has reportedly taken a hit in the recent environment, it will likely spring back as ad prices decline. The stock has bounced back from a decline from $220 to $140, and now trades right around $175 with a PE of 29.