4 Intriguing Internet Stocks to Buy in September An increasing reliance on advanced technologies, social media platforms, and search engines has been driving the growth of companies that operate in t...
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An increasing reliance on advanced technologies, social media platforms, and search engines has been driving the growth of companies that operate in this space. In addition, continuing innovation and the increasing application of internet-based solutions in most industries should help the internet services industry keep growing. We think this bodes well for fundamentally sound internet stocks Alphabet (GOOGL), Facebook (FB), Yelp (YELP), and Groupon (GRPN). Read on.
With ongoing digitalization, the dependency on the internet services industry is increasing. According to a Broadband Search report, 63.2% of the world's population uses the internet.
The rising dependence of governments, businesses, and individuals on internet-based services should drive the industry's growth. The global internet service market is expected to reach $632.4 billion by 2027, registering a 5% CAGR. Furthermore, the growing popularity of the Internet of Things (IoT) in industries that include IT, education, banking, and healthcare is expected to propel the demand for services offered by internet companies.
Therefore, we think it could be wise to bet on quality internet stocks Alphabet Inc. (GOOGL), Facebook, Inc. (FB), Yelp Inc. (YELP), and Groupon, Inc. (GRPN). They are each expected to deliver substantial returns in the near term based on their consistent innovations, diverse portfolios of products, and strong sales growth.
Alphabet Inc. (GOOGL)
With a market cap of $1.9 trillion, tech giant GOOGL is one of the most valuable companies in the world. It operates through Google services; Google Cloud; and Other Bets segments. Created through a restructuring in 2015, it is the world leader in digital ad revenue.
This month, one of GOOGL's segments, Google Cloud, partnered with digital services provider T-Systems. The agreement should help both the companies build and deliver a large spectrum of next-generation sovereign cloud services for German enterprises and healthcare organizations. Also, this innovation should help customers host sensitive workloads on a sovereign cloud.
GOOGL's revenue for the second quarter, ended June 30, 2021, increased 61.6% year-over-year to $61.88 billion. The company's income from operations grew 203.3% from its year-ago value to $19.36 billion. Its net income rose 166.2% from the prior-year quarter to $18.53 billion. Also, the company's EPS increased 169.1% year-over-year to $27.26.
Analysts expect GOOGL's revenue to increase 37.4% year-over-year to $250.74 billion in its fiscal year 2021. Also, the company has an impressive earnings surprising history; it surpassed the consensus EPS estimates in each of the trailing four quarters. In addition, its EPS is expected to increase 72.2% in the current year. Moreover, the stock has gained 64% in price over the past nine months and 88.2% over the past year.
GOOGL's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Sentiment and Quality. We've also graded GOOGL for Momentum, Stability, Value, and Growth. Click here to access all GOOGL's ratings. GOOGL is ranked #3 of 75 stocks in the Internet industry.
Facebook, Inc. (FB)
Popular social media platform provider FB is a multinational technology company that enables people to connect virtually. FB's products include Facebook app, Messenger, Instagram, WhatsApp, Oculus, Workplace, Portal, and Novi. It has surpassed one billion registered accounts and had more than 2.85 billion monthly active users as of July 2021.
For the second quarter, ended June 30, 2021, FB's revenue increased 55.6% year-over-year to $29.08 billion. The company's income from operations grew 107.4% from its year-ago value to $12.37 billion. Its net income rose 100.7% from the prior-year quarter to $10.39 billion. Also, the company's EPS increased 100.6% year-over-year to $3.61.
FB's revenue is expected to increase 39% year-over-year to $119.49 billion in its fiscal year 2021. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to increase by 40.1% in the current year. Over the past six months, the stock has climbed 36.6% in price.
FB's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Quality, and a B for Sentiment.
In addition to the POWR Rating grades we've just highlighted, one can see FB's ratings for Value, Stability, Growth, and Momentum here. FB is ranked #6 in the Internet industry.
Yelp Inc. (YELP)
YELP's platform connects people with local businesses, such as hotels, restaurants, automotive, home services, salons, and other businesses, and publishes crowd-sourced reviews about businesses. In addition, the company develops, hosts, and markets the Yelp.com website and the Yelp mobile app and operates a table reservation service, Yelp Reservations.
Last month, YELP advanced its search advertising platform, "Behind the Click," to deliver greater value to advertisers in the form of lower average cost-per-click and higher retention rates. With this development, advertisers can connect potential customers in ways that benefit both the advertisers and customers equally.
YELP's net revenue increased 52.2% year-over-year to $257.19 million in the second quarter ended June 30, 2021. The company's net income came in at $4.21 million for the quarter, versus a $23.99 million net loss in the second quarter of 2020. Its EPS was $0.05, versus a $0.33 loss per share in the prior-year quarter. Also, the company's adjusted EBITDA increased 473% year-over-year to $64 million.
For its fiscal year 2021, analysts expect YELP's revenue to increase 17.6% year-over-year to $1.03 billion. It has surpassed the consensus EPS estimates in three of the trailing four quarters. The company's EPS is estimated to increase 114.8% in the current year and 1,025% next year. The stock has gained 26.1% in price over the past nine months and 62.5% over the past year.
It's no surprise that YELP has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Quality and Value.
Click here to see the additional POWR Ratings for YELP (Growth, Momentum, Stability, and Sentiment). In the Internet industry, YELP is ranked #2.
Groupon, Inc. (GRPN)
Incorporated in 2008, GRPN builds partnerships with local businesses and connects customers with merchant partners through its mobile applications and websites. In addition, the company offers goods and services on behalf of third-party merchants, and first-party goods inventory. GRPN operates in two segments: North America and International.
Last month, GRPN launched a new global brand campaign in partnership with FCB, "Grab Life by the Groupon," to encourage people to get out and explore the world. The campaign will showcase GRPN as the destination for affordable local experiences, improve its inventory, and help modernize its customer and merchant experiences.
For the second quarter, ended June 30, 2021, GRPN's revenue under service increased 83.5% year-over-year to $206.16 million. The company's gross profit grew 41.3% from its year-ago value to $193.94 million. Its loss from operations declined 97.2% from the prior-year quarter to $1.99 million. Also, the company's net loss decreased 95.7% year-over-year to $3.13 million.
Analysts expect GRPN's revenue to increase 2.1% year-over-year to $1 billion in its fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. GRPN's EPS is expected to increase by 150% in the current year.
GRPN's strong fundamentals are reflected in its POWR Ratings. The stock has a B grade for Value, Growth, and Quality. We've also graded GRPN for Momentum, Stability, and Sentiment. Click here to access all of GRPN's ratings. In the Internet industry, GRPN is ranked #8.
GOOGL shares fell $10.59 (-0.37%) in premarket trading Thursday. Year-to-date, GOOGL has gained 64.21%, versus a 20.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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