Forager examines social media stocks

16 November 2021
| By Laura Dew |
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Social media stocks have been a pain point for Forager Funds Management after privacy changes by Apple caused their share prices fall.

The firm, which owns Twitter and Pinterest in its International Shares fund, said the changes meant Apple users would need to opt-in to allow applications to track their activity which was a change from it being the default option.

“Historically, opting in was the default option – meaning, advertisers have been tracking us for years,” it said.

“The data captured was invaluable, allowing businesses to serve us targeted advertising based on our interests and accurately measure the success of advertising campaigns. Without it, both of these things get much more difficult.”

The change in policy caused social media stocks to see a fall in their share price with Twitter, Snapchat and Pinterest all down significantly, while Facebook saw a slight fall.

Over the three months to 12 November, Snapchat was down 29%, Pinterest down 19%, Twitter down 18%, while Facebook was down 6% versus gains of 4.9% by the S&P 500, according to data from Google Finance.

Referencing Twitter in its investment note, the firm said: “We think Twitter’s purpose, which revolves around users’ interests, professions and hobbies more than their social circle, puts it in a better position to deal with changes than Snapchat, for example.

“The company announced its results, held its conference call, brokers put out early notes saying everything was on track, and the stock traded up in the post-market – a sign investors were pleased,” Forager said.

“But the next day, the stock fell 10% and has barely budged since. Scepticism abounds, and we sympathise. Twitter has not yet lived up to its potential. But we think new product development and progress on revenue and user numbers point to a company improving at a rapid clip.”

Meanwhile, Pinterest was not materially affected by the Apple changes but monthly active users remained static from the same period last year which Forager said had “been a concern” for them.

“Due to the nature of the platform, Pinterest has a rich set of first-party data that it can use to serve users with targeted ads,” it said.

“While it’s still early days, the company has been preparing for these changes for some time now, investing in technology to improve conversion visibility with a focus on user privacy.”

The Forager International Shares fund had returned 39.8% over one year to 31 October, according to FE Analytics, versus returns of 28.6% by the global equity sector within the Australian core strategies universe.

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