The internet industry is set for strong long-term growth because of its key role in digitalizing sectors, its integration into our daily lives, evolving consumer demands for online solutions, and improving global user experiences. High-speed internet has transformed global e-commerce, and the rise of Gen AI tools is enhancing consumer spending, reinforcing the internet sector's growth potential.
Given this backdrop, investors could consider buying fundamentally strong internet stocks such as Pinterest, Inc. (PINS), eBay Inc. (EBAY), and Amazon.com, Inc. (AMZN), which are poised for growth.
The internet has experienced a rapid increase in global users, who spend more time online, particularly on mobile devices, altering how they interact with internet services and shop. Its integration into daily life via devices and services has driven internet usage, benefiting the industry significantly. The global e-commerce market is expected to reach $6.3 trillion in 2024.
In this era of strong connectivity, businesses are leveraging the Internet for digital channel expansion, omnichannel experiences, generative AI for insights, robust brand promotion platforms, and improved return processes. The global internet services market is expected to grow at a 4.4% CAGR, reaching $733.79 billion by 2031.
Furthermore, investors’ interest in Internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 40.7% returns over the past year.
Considering these conducive trends, let’s examine the fundamentals of the three Internet stock picks, beginning with the third choice.
Stock #3: Pinterest, Inc. (PINS)
PINS operates as a visual search and discovery platform internationally. Its platform allows people to find ideas, such as recipes, home and style inspiration, and others, and to search, save, and shop for the ideas.
In terms of its trailing-12-month Return on Total Assets, PINS’ 4.04% is 224.7% higher than the 1.24% industry average. Likewise, its 23.10% trailing-12-month levered FCF margin is 199.5% higher than the 7.71% industry average. Furthermore, the stock’s 0.88x trailing-12-month asset turnover ratio is 80.6% higher than the 0.49x industry average.
For the first quarter ended March 31, 2024, PINS’ revenue increased 22.8% year-over-year to $739.98 million. Its non-GAAP net income rose 141.8% over the prior-year quarter to $139.50 million. The company’s adjusted EBITDA increased 318.7% year-over-year to $112.92 million. In addition, its non-GAAP net income per share came in at $0.20, representing an increase of 150% year-over-year.
For the quarter ending June 30, 2024, PINS’ EPS and revenue are expected to increase 31.6% and 19.6% year-over-year to $0.28 and $846.88 million, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, PIN’s stock has gained 98.1% to close the last trading session at $42.77.
PINS’ bright prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth, and Quality and a B for Sentiment. It is ranked #22 out of 52 stocks in the B-rated Internet industry. To access the additional grades of PINS for Value, Momentum, and Stability, click here.
Stock #2: eBay Inc. (EBAY)
EBAY operates marketplace platforms that connect buyers and sellers in the United States and internationally. The company's marketplace platforms include eBay.com and the eBay suite of mobile apps. They enable users to list, buy, and sell various products.
In terms of the trailing-12-month gross profit margin, EBAY’s 72.11% is 97.1% higher than the 36.58% industry average. Its 4.60% trailing-12-month Capex / Sales is 50.1% higher than the 3.06% industry average. Also, the stock’s 12.32% trailing-12-month Return on Total Assets is 195% higher than the 4.17% industry average.
During the fiscal first quarter that ended March 31, 2024, EBAY’s net revenues increased 1.8% year-over-year to $2.56 billion. Its gross profit rose 2.5% year-over-year to $1.86 billion. Also, its non-GAAP net income from continuing operations stood at $648 million and 1.25 per share, up 8% and 12.6% over the prior-year quarter, respectively.
Street expects EBAY’s EPS for the quarter ending June 30, 2024, to increase 9.1% year-over-year to $1.12. Its revenue for the quarter ending September 30, 2024, is expected to grow 1.6% year-over-year to $2.54 billion. It surpassed the Street EPS and revenue estimates in each of the trailing four quarters. Over the past six months, the stock has gained 31.2% to close the last trading session at $52.70.
EBAY’s POWR Ratings reflect its positive outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth, and Momentum. Within the same industry, it is ranked #7. To see EBAY’s ratings for Value, Stability, and Sentiment, click here.
Stock #1: Amazon.com, Inc. (AMZN)
AMZN sells consumer products and subscriptions through online and physical stores in North America and internationally. It operates through three segments: North America, International, and Amazon Web Services (AWS). The company's products offered through its stores include merchandise and content purchased for resale and products provided by third-party sellers.
On May 3, 2024, AMZN announced an extended strategic partnership with CrowdStrike, unifying cybersecurity protection on the Falcon platform and expanding the use of Amazon Bedrock and SageMaker for AI innovations in cloud security.
This collaboration aims to enhance threat detection and response capabilities for customers, leveraging the strengths of both companies in cybersecurity and artificial intelligence.
On the same date, AMZN announced Brightcove's integration of Amazon Q, a generative AI assistant on AWS, to enhance customer service by streamlining support processes and providing real-time assistance through AI-powered chatbots.
This integration is expected to improve response times and overall customer satisfaction by leveraging the capabilities of Amazon Q to quickly address customer inquiries and issues.
In terms of the trailing-12-month net income margin, AMZN’s 6.38% is 36.1% higher than the 4.69% industry average. Likewise, its 9.05% trailing-12-month Capex / Sales is 195.5% higher than the 3.06% industry average. Moreover, the stock’s 1.19x trailing-12-month asset turnover ratio is 19.4% higher than the 0.99x industry average.
AMZN’s total net sales during the fiscal first quarter that ended March 31, 2024, increased 12.5% year-over-year to $143.31 billion. The company’s operating income grew 220.6% from the year-ago value to $15.31 billion. In addition, the company’s net income and EPS came in at $10.62 billion and $1, up 228.8% and 216.1% over the prior-year quarter, respectively.
Analysts expect AMZN’s EPS for the quarter ending June 30, 2024, to increase 55.3% year-over-year to $1.01. Its revenue for the same quarter is expected to grow 10.6% year-over-year to $148.65 billion. It surpassed the consensus EPS estimate in three of the trailing four quarters. Over the past year, the stock has gained 61.9% to close the last trading session at $183.63.
It’s no surprise that AMZN has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Growth, Momentum, and Quality. It is ranked #6 in the Internet industry. In total, we rate AMZN on eight different levels. Beyond what we have stated above, we also have given AMZN grades for Value, and Stability. Get all the AMZN ratings here.
What To Do Next?
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AMZN shares were trading at $184.26 per share on Friday afternoon, up $0.63 (+0.34%). Year-to-date, AMZN has gained 21.27%, versus a 11.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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