5 Social Networking Stocks to Watch

NEW YORK ( TheStreet) -- A look at the top social networking Web sites shows that Facebook reigns, with more than 800 million active users, while professional social network LinkedIn ( LNKD) accounts for more than 120 million visitors worldwide. Twitter grabs the third spot, with more than 100 million users; the new Google plus ( GOOG) comes in fourth with 20 million users.

Visitation to these Web sites is rising as social networking through mobile networks is climbing; it is estimated to exceed 550 million in 2011, and triple to 1.7 billion by the end of 2016. Analysts polled by Bloomberg foresee potential upside of 8% to 60% for these stocks, with buy ratings of 52% and hold ratings of 39%.

Below, the stocks are listed in ascending order of potential upside based on analysts' price targets.


5. LinkedIn is a professional social network with more than 120 million users across 200 countries and territories. Through this site, people can create, manage and share their professional identity online.

For the second quarter, subscriptions increased 61% from the year-ago quarter to 115.8 million members. Also, page views grew 80% to 7.1 billion from the second quarter of 2010. Revenue for the quarter increased to $121 million, up 120% from the year-ago quarter. Net income increased to $4.5 million from $4.3 million earlier.

LinkedIn recently announced reaching more than one million professional members in Belgium. Additionally, the professional network is expanding its presence in Germany by opening its first office in Munich. The office would support the company's growing membership of more than two million professionals across the German-speaking markets.

For the 2011 third quarter, revenue is estimated to range between $121 million and $125 million. Adjusted EBITDA is forecast between $9 million and $11 million. Revenue for the full year is expected to range from $475 million to $485 million, while adjusted EBITDA is projected between $65 million and $70 million.

Of the 10 analysts covering the stock, 30% recommend a buy and 50% rate it a hold. Analysts surveyed by Bloomberg forecast an average 12-month price target of $87.60, nearly 11.3% greater than the current price.

Note: Potential upside is based on analysts' price targets.

Note: Potential upside is based on analysts' price targets.

4. Google focuses on areas like search, advertising, operating systems and platforms, and enterprise. The company generates revenue by delivering online advertising. The company recently launched its full-fledged social networking Web site Google plus in order to make Web sharing more like sharing in real life.

For the second quarter of 2011, the company recorded revenues of $9.03 billion, up 32% from the year-ago quarter. GAAP net income was $2.51 billion, or $7.68 per share, compared to $1.84 billion, or $5.714 per share, in the second quarter of 2010. For the quarter, the company's aggregate paid clicks were up almost 18% from the year-ago quarter, while cost per click increased 12%.

Recently, Google acquired Android phone maker Motorola Mobility, a subsidiary of Motorola Mobility Holdings ( MMI), for $12.5 billion, or $40 per share, at a 63% premium. The company intends to run Motorola Mobility as a separate business entity after closing the deal in 2011 or early 2012. With this deal, Google would gain patent protection (3G, 4G wireless technologies), hardware assets to build a closed and integrated system and Motorola's set-top box business.

Additionally, Visa Europe and Google Have announced that Google has received a worldwide license to Visa payWave, an NFC-powered payment technology. This technology simplifies consumers' shopping experience as they would be able to make fast and secure payments at retail locations by waving their mobile phones in front of a payment terminal installed with a Google Wallet application.

Of the 42 analysts covering the stock, 90% recommend a buy and the rest rate it a hold. There are no sell ratings on the stock. Analysts surveyed by Bloomberg have an average 12-month price target of $723.20 for the stock, which is 36.0% higher than the current price.

Note: Potential upside is based on analysts' price targets.

3. Sina ( SINA), an online media company and MVAS provider in China, offers services through five business lines: SINA.com (online news and content), SINA Mobile (MVAS), SINA Community (Web 2.0 and social networking-based services and games), SINA.net (search and enterprise services) and SINA E-Commerce (online shopping).

Sina reported second-quarter 2011 revenue of $119 million, an increase of 20% from the year-ago quarter. Advertising revenue surged 26% to a record $91.8 million. The company's Chinese micro blogging Web site Weibo.com has become an online phenomenon, with registered accounts surpassing 200 million recently. Net income stood at $10 million, or 15 cents per diluted share.

For the third quarter of 2011, net revenue is expected between $123 million and $126 million, while advertising revenue is likely to range from $100 million to $102 million. The company's 9% stake in the online video site Tudou Holdings is valued at $64 million. Sina said that it is expanding presence in online video services to attract users in the world's biggest Internet market.

China's micro-blogging has rocketed recently, as popular social networks have attracted 40% of Internet users, findings of a Paragon report state. As China's micro-blogging giant, Sina has the potential to capture the untapped market. A McKinsey report says six million new users go online every month in China.

Of the 28 analysts covering the stock, 50% recommend a buy and 43% suggest a hold. Analysts polled by Bloomberg project an average 12-month price target of $120.88, up 46.8% from the stock's current price.

Note: Potential upside is based on analysts' price targets.

2. Baidu ( BIDU), a Chinese-language Internet search provider, operates through its wholly owned subsidiary Baidu Online Network Technology and Baidu Netcom Science Technology, which holds the license and approvals necessary to operate the company's Web sites and provide online advertising services. The company has also launched a Japanese search engine.

For the second quarter of 2011, Baidu reported total revenue of $528.4 million, an increase of 78.4% from the year-ago quarter. Net income for the quarter was up 95% to $252.6 million, or 72 cents per share, from the second quarter of 2010. Traffic acquisition cost for the quarter reduced to 7.9% of total revenue from 9.7% in the prior-year quarter.

For the third quarter, the company guides revenue between $611.1 million and $626.6 million, up 75.1% to 79.5% from the year-ago quarter and significantly higher than industry estimates of $569 million.

Dell ( DELL) is partnering Baidu to develop tablet computers and mobile phones, industry sources say. Baidu will provide its new mobile operating system called Baidu Yi, which is based on open-source Android, and Dell will incorporate it in smartphones and tablets for the Chinese market. The continuous growth in China's online advertising market and Baidu's growing dominance in the search advertising market in China is likely to raise the company's revenue per search over the upcoming years.

Of the 33 analysts covering the stock, 91% recommend a buy and the rest suggest a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg project an average 12-month price target of $189.93, up 55% from the stock's current price.

Note: Potential upside is based on analysts' price targets.

1. Renren ( RENN), a social networking platform in China, generates revenue from online advertising and Internet value-added services. The company's platform enables users to connect and communicate with each other, share information and user-generated content, play online games, listen to music, shop for deals and a range of other services.

For the second quarter of 2011, Renren recorded net revenue of $30.4 million, up 53.2% from the same quarter a year ago. Online advertising revenue grew 93.8%. The company swung to net income of $800,000, vs. a net loss of $25.5 million for the second quarter of 2010.

Active users increased from 96.8 million at the end June 2010 to 124.2 million as of June 30, 2011. Unique log-in users increased to 34.4 million in June 2011 from 25.0 million in the same month the prior year. For the 2011 third quarter, the company expects revenue to range between $33.5 million and $35.5 million, a 54% to 63% year-over-year increase.

The company recently announced a definitive agreement to acquire 100% of 56.com, a leading user-generated content online video sharing site in China, for $80 million in cash. The deal is likely to close in the fourth quarter of 2011. Besides, the company officially launched Renren Xiaozhan (zhan.renren.com), a light blogging service that further expands its array of social networking offerings.

Of the 11 analysts covering the stock, 27% recommend a buy and 55% rate it a hold. Data from Bloomberg has analysts reporting an average 12-month price target of $8.57, up 60.2% from the stock's current price.


Asia accounts for 44% of global Internet users totaling 2.1 billion, according to Internet World Statistics. Regarding social networking, visitation and engagement trends reveal that Asia-Pacific contributes 32.5% of worldwide visitors to these Web sites, a comScore report shows. Europe follows with 30.1%, while North America represents 18.1%. Latin America accounts for 10.2% and the Middle East and Africa represent 9.1% combined.

However, in terms of time spent on these social networks, Europe accounts for 38.1% of minutes, followed by North America's 21.4% share.

>>To see these stocks in action, visit the 5 Social Networking Stocks to Watch portfolio on Stockpickr.

If you liked this article you might like

Video: Best Presidents Day Deals!

Video: Best Presidents Day Deals!

Inside Goldman Sachs Tech Conference: Must Knows on Bitcoin, Ethereum and ICOs

Inside Goldman Sachs Tech Conference: Must Knows on Bitcoin, Ethereum and ICOs

Only Wall Street's Dumbest Think Amazon Will Be Able to Skirt Regulation Forever

Only Wall Street's Dumbest Think Amazon Will Be Able to Skirt Regulation Forever

Buy Stocks That Are Right for You: Cramer's 'Mad Money' Recap (Friday 2/16/18)

Buy Stocks That Are Right for You: Cramer's 'Mad Money' Recap (Friday 2/16/18)

Shorts Trampled In Bull Market Rally; UPS Share Structure Examined -- ICYMI

Shorts Trampled In Bull Market Rally; UPS Share Structure Examined -- ICYMI