The pandemic has increased the dependency on the web for occupational, recreational, educational, and communication-related needs. Also, a recent study revealed that 4.95 billion use the internet daily in 2022, up 6.2% year-over-year.
Social media has been a significant contributor to the dominance of the internet, with a 58.4% of the global population using it. Now, the internet is expected to undergo a seismic shift, with the next generation of the web, the web 3.0, in sight. The new web is predicted to enhance efficiency in browsing and increase interconnectivity.
Given this backdrop, we think investors should buy popular internet stocks Meta Platforms, Inc. (META), Twitter, Inc. (TWTR), Snap Inc. (SNAP), and Expedia Group, Inc. (EXPE) on weakness.
Meta Platforms, Inc. (META)
META is a popular social media company that owns Facebook, Instagram, and WhatsApp, among other products and services. The company recently announced that its Class A common stock would start trading under the ticker symbol ‘META’ on the Nasdaq, replacing its prior symbol ‘FB.’
Earlier in the same month, Liberty, a part of Algonquin Power & Utilities Corp. (AQN), announced its collaboration regarding a long-term power purchase agreement (PPA) with META on the new 112 MW Deerfield II wind project in Michigan, which is expected to enable META to support its operations with renewable energy.
META’s total revenue increased 6.6% year-over-year to $27.91 billion in the first quarter ended March 31. Net cash provided by operating activities increased 15% to 14.08 billion. Net income and EPS came in at $7.47 billion and $2.72, respectively.
The consensus EPS estimate of $13.93 for the fiscal year 2023 indicates a 19.1% improvement year-over-year. The consensus revenue estimate of $146.90 billion for the same year represents an increase of 16.3% from the prior year. Moreover, META has an impressive surprise earnings history, as it has topped consensus EPS estimates in three out of the trailing four quarters.
The stock has declined 49.7% year-to-date but has gained 3.4% intraday to close yesterday’s trading session at $169.35.
Twitter, Inc. (TWTR)
TWTR flagship platform Twitter allows users to consume, create, distribute, and discover content. It also enables advertisers to promote brands and products to a targeted audience.
Last month, TWTR filed a proxy statement with the U.S. Securities and Exchange Commission (SEC) regarding the acquisition of Twitter by Elon Musk for $54.20 per share in cash. On June 3, the company announced the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 concerning the acquisition.
In the first quarter ended March 31, TWTR’s revenue increased 15.9% year-over-year to $1.20 billion. Non-GAAP net income increased 435.1% year-over-year to $755.57 million, while its non-GAAP net income per share grew 462.5%% from the prior-year quarter to $0.90.
Street EPS estimate of $1.14 for the fiscal year 2022 indicates a 468% year-over-year increase. Analysts expect revenue growth of 16.8% year-over-year to $5.93 billion for fiscal 2022.
TWTR’s stock has gained 11.8% over the past three months to close yesterday’s trading session at $37.99. However, it is down 12.1% year-to-date.
Snap Inc. (SNAP)
SNAP offers Snapchat a camera application with various functionalities that enable people to communicate visually through short videos and images, and Spectacles, an eyewear product that connects with Snapchat and captures photos and video from a human perspective.
In April, independent performance marketing firm Tinuiti announced an agreement with SNAP to become a strategic partner. “Tinuiti has a proven record of creating new advertising opportunities and achieving performance-driven success for its clients. With this partnership, Tinuiti will be able to leverage the power of Snap to accomplish those goals.”, said Nadav Geft, Manager of Agency Development, SNAP.
SNAP’s revenues increased 38.1% year-over-year to $1.06 billion in the first quarter ended March 31. The company’s adjusted EBITDA grew 3,872.3% year-over-year to $64.47 million. Cash, cash equivalents, and restricted cash balance came in at $2.41 billion, up 149.2% from the same period last year.
The company’s EPS is expected to grow 158.5% year-over-year to $0.63 for the fiscal year 2023. Street expects SNAP’s revenue for the same year to increase 36.1% from the prior year to $6.90 billion. Moreover, SNAP has topped three consensus EPS estimates out of the trailing four quarters, which is impressive.
SNAP’s shares have slumped 71.9% year-to-date to close yesterday’s trading session at $13.20. However, it has gained 10.8% intraday.
Expedia Group, Inc. (EXPE)
EXPE is an online travel company operating through Retail; B2B; and trivago segments. The company’s brand portfolio includes Brand Expedia, Hotels.com, Vrbo, Hotwire, and CarRentals.com.
On May 4, EXPE announced its three-tiered strategy to redefine its place in the travel industry with the introduction of its new marketplace Expedia Group Open World. The platform is expected to deliver an e-commerce suite that would enable anyone to enter the travel business.
On April 14th, EXPE entered a new $2.5 billion unsecured credit facility, which is expected to provide $500 million in additional liquidity compared to the prior credit facilities.
EXPE’s revenue increased 80.5% year-over-year to $2.25 billion in the first quarter ended March 31. Its adjusted EBITDA grew 398.3% from the year-ago value to $173 million. Free cash flow stood at $2.84 billion, up 41.6% from the prior-year period.
The consensus EPS estimate of $4.19 for the fiscal third quarter (ending September 2022) indicates an 18.7% improvement year-over-year. Analysts expect revenue growth of 23.6% year-over-year to $3.66 billion for the same quarter. EXPE has beaten Street EPS estimates in three out of the trailing four quarters.
The stock has declined 42.2% year-to-date but gained 2.4% intraday to close yesterday’s trading session at $104.41.
META shares were trading at $160.87 per share on Thursday afternoon, down $8.48 (-5.01%). Year-to-date, META has declined -52.17%, versus a -22.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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