The rising necessity for fast and effective connectivity has primed the internet industry for significant growth. To that end, fundamentally robust internet stocks Wix.com Ltd. (WIX), Tripadvisor, Inc. (TRIP), and Yelp Inc. (YELP) could be wise portfolio additions for potential gains now.
Internet accessibility continues to proliferate worldwide, with 5.35 billion internet users, or 66.2% of the global population. Over the past year, internet users have grown by 1.8%, with around 97 million new users using online platforms for the first time. This rising internet adoption should bode well for the industry.
Since social media is considered to be the most used online activity, Statista estimates that the number of social networks users in the U.S. is expected to hit over 342 million by 2029.
The rising attempt by the Biden administration to provide speedy and economical internet services throughout the country by 2030 under the 2021 infrastructure law is expected to bolster the number of internet users and increase digital connectivity with everyone.
Moreover, the internet industry’s growth is attributed to advancements in 5G, blockchain, AR/VR, AI, and cloud services, coupled with the growing trend of working from home, hybrid working facilities, utilization of collaborative tools, and creating content, have bolstered the utilization and internet speed of the internet industry.
Moreover, the global internet service market is projected to reach $733.79 billion, growing at a 4.4% CAGR by 2031.
Considering these conducive trends, let's take a look at the fundamentals of the three Internet sector stocks.
Wix.com Ltd. (WIX)
Headquartered in Tel Aviv, Israel, WIX develops and markets a cloud-based platform for creating a website or web application in North America, Europe, Latin America, Asia, and internationally.
Recently, WIX announced that partners creating on Wix Studio can sell Studio templates directly within the Wix Marketplace. The expansion of the Wix Marketplace enables partners to offer their services and market and sell templates they've created, further diversifying their offerings and increasing their earning potential.
On March 18, WIX announced amendments to the Israeli Companies Regulations, which eliminate the requirement to obtain mandatory Israeli court approval for share repurchases for companies otherwise required to obtain such approval. This would allow WIX to expedite its ability to begin executing share repurchase activity.
WIX’s trailing-12-month asset turnover ratio of 0.88x is 43.2% higher than the industry average of 0.61x. Similarly, its trailing-12-month cash per share of $10.66 is 407.7% higher than the industry average of $2.10.
Over the past three and five years, its revenue grew at CAGRs of 16.6% and 20.9%, respectively, while its total assets grew at a 16.4% CAGR over the past five years.
For the fiscal fourth quarter that ended December 31, 2023, WIX’s revenues and non-GAAP gross profit stood at $403.77 million and $282.01 million, up 13.7% and 21.8% year-over-year, respectively. Moreover, its free cash flow increased 108.3% from the prior-year quarter to $80.39 million.
For the same quarter, its non-GAAP net income and non-GAAP net income per share stood at $74.04 million and $1.22, up 107.8% and 100% from the year-ago quarter, respectively.
Street expects WIX’s revenue and EPS for the fiscal first quarter that ended March 2024 to increase 11.7% and 14.7% year-over-year to $417.85 million and $1.04, respectively. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 47.6% over the past nine months to close the last trading session at $122.62. Over the past six months, it has gained 43.2%.
WIX’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth. It is ranked #6 out of 28 stocks within the Internet - Services industry.
Click here for the additional POWR Ratings for WIX (Value, Momentum, Stability, Sentiment, and Quality).
Tripadvisor, Inc. (TRIP)
TRIP is an online travel company that provides travel guidance products and services worldwide. The company operates in three segments: Brand Tripadvisor; Viator; and TheFork.
During the fourth quarter that ended December 31, 2023, TRIP repurchased 1.32 million shares of its common stock at an average price of $18.85 per share, or $25 million under its existing share repurchase program authorized by the board of directors during the fiscal third quarter of 2023. Additionally, during fiscal 2023, the company repurchased 6.05 million shares of common stock at an average price of $16.51 per share, or $100 million.
TRIP’s trailing-12-month asset turnover ratio of 0.70x is 46% higher than the industry average of 0.48x. Similarly, its trailing-12-month cash per share of $7.75 is 391.3% higher than the industry average of $1.58.
Over the past three and five years, its revenue grew at CAGRs of 43.6% and 2.1%, respectively, while its total assets grew at 8.8% and 3.2% CAGRs over the same periods.
For the fiscal fourth quarter that ended December 31, 2023, TRIP’s revenue and adjusted EBITDA stood at $390 million and $84 million, up 10.2% and 95.3% year-over-year, respectively. For the same quarter, its non-GAAP net income and non-GAAP earnings per share as adjusted increased 450% and 442.9% from the prior-year quarter to $55 million and $0.38, respectively.
Street expects TRIP’s revenue for the fiscal first quarter that ended March 2024 to increase 6% year-over-year to $393.17 million. Its EPS is expected to be $0.03 for the same quarter. The company surpassed consensus revenue estimates in each of the trailing four quarters.
The stock has gained 54.7% over the past six months to close the last trading session at $25.40. Over the past nine months, it has gained 44.8%.
TRIP’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
TRIP has an A grade for Quality and a B for Growth. Within the B-rated Internet industry, it is ranked #8 out of 53 stocks.
To see additional POWR Ratings for Value, Momentum, Stability, and Sentiment for TRIP, click here.
Yelp Inc. (YELP)
YELP operates a platform that connects consumers with local businesses in the U.S. and internationally.
YELP’s board of directors authorized a $500 million increase to its share repurchase program in the fourth quarter that ended December 31, 2023.
YELP’s trailing-12-month asset turnover ratio of 1.32x is 174.6% higher than the industry average of 0.48x. Similarly, its trailing-12-month cash per share of $4.56 is 189% higher than the industry average of $1.58.
Over the past three and five years, its revenue grew at CAGRs of 15.3% and 7.2%, respectively, while its levered free cash flow grew at 24.7% and 27% CAGRs over the same periods.
For the fiscal fourth quarter that ended December 31, 2023, YELP’s net revenue and free cash flow stood at $342.38 million and $73.17 million, up 10.8% and 124.5% year-over-year, respectively. For the same quarter, its net income attributable to common stockholders and net income per share attributable to common stockholders increased 36% and 32.1% from the prior-year quarter to $27.41 million and $0.37, respectively.
Street expects YELP’s revenue for the fiscal first quarter that ended March 2024 to increase 6.7% year-over-year to $333.35 million. Its EPS is expected to be $0.49 for the same quarter. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 30.3% over the past year to close the last trading session at $39.56. Over the past month, it has gained 5.4%.
YELP’s POWR Ratings reflect this promising outlook. It has an overall rating of A, which indicates a Strong Buy in our proprietary rating system.
YELP has an A grade for Quality and a B for Growth and Value. Within the Internet industry, it is ranked #3.
For YELP’s ratings for Momentum, Stability, and Sentiment, click here.
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WIX shares were unchanged in premarket trading Thursday. Year-to-date, WIX has declined -0.33%, versus a 5.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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