3 Internet Stocks You Might End up Liking More Than Amazon Despite macroeconomic headwinds, internet penetration is expected to increase in the foreseeable future, owing to consistent digital transformation. Therefore, fundamentally strong internet stocks Tripadvisor (TRIP), Yelp (YELP), and Data Storage...
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Despite macroeconomic headwinds, internet penetration is expected to increase in the foreseeable future, owing to consistent digital transformation. Therefore, fundamentally strong internet stocks Tripadvisor (TRIP), Yelp (YELP), and Data Storage (DTST) might be solid portfolio additions over Amazon (AMZN). Read on….
Despite uncertainties remaining at the forefront, rapid digitalization could bolster the internet sector. Therefore, let us probe into some internet stocks, Tripadvisor, Inc. (TRIP), Yelp Inc. (YELP), and Data Storage Corporation (DTST), which might be preferred over Amazon.com, Inc. (AMZN), for the reasons mentioned throughout the article.
The demand for the internet has been rapidly increasing in the post-pandemic world for home-office hybrid work environments, online learning, gaming, shopping, communication, and managing finances. It is considered the most crucial tool in a globalized world. As of 2023, approximately 92% of the total U.S. population accessed the internet, up from nearly 75% in 2012.
E-commerce giant AMZN fell out of the trillion-dollar club last year, as its market cap shrunk to $944.49 billion from about $1.7 trillion at the beginning of 2022. Apart from being affected by the macroeconomic headwinds, the company is competing with slowing sales now, compared to its pandemic sales.
The company incurred a net loss of $2.72 billion for the fiscal year that ended December 31, 2022, compared to a net income of $33.36 billion for the fiscal year that ended December 31, 2021. Moreover, as a cost-cutting measure, AMZN is laying off more than 18,000 employees.
On the bright side, the Biden administration has worked together to include a record $65 billion in the Bipartisan Infrastructure Law to expand "Internet for All," granting access to all Americans reliable and affordable high-speed internet.
Furthermore, the global internet service market is expected to grow at a 4.2% CAGR between 2023 and 2029 to be valued at $651.74 billion. Investors' interest in internet stocks is evident from the Invesco NASDAQ Internet ETF's (PNQI) 5.4% gains over the past three months.
Against this backdrop, fundamentally strong internet stocks TRIP, YELP, and DTST can be wise portfolio additions now instead of AMZN.
Tripadvisor, Inc. (TRIP)
TRIP operates as an online travel company, providing travel guidance products and services worldwide. The company operates in three segments: Tripadvisor Core; Viator; and TheFork.
TRIP's forward EV/Sales of 1.71x is 12% lower than the industry average of 1.95x. Its forward non-GAAP PEG of 0.67x is 56.8% lower than the industry average of 1.55x.
Its trailing-12-month gross profit margin of 92.23% is 85.8% higher than the industry average of 49.63%, while its trailing-12-month levered FCF margin of 21.09% is 137.5% higher than the industry average of 8.88%.
TRIP's total revenue came in at $354 million for the fiscal fourth quarter that ended December 31, 2022, up 46.9% year-over-year. Its non-GAAP net income came in at $24 million, compared to a loss of $1 million in the year-ago period.
Moreover, its non-GAAP EPS came in at $0.16, compared to a loss per share of $0.01 in the prior-year period. Its adjusted EBITDA increased 48.3% year-over-year to $43 million for the same quarter.
Analysts expect TRIP's revenue to increase 12.2% year-over-year to $467.91 million in the fiscal second quarter ending June 2023. Its EPS is expected to rise 15.9% year-over-year to $0.43 for the same quarter. The company surpassed revenue estimates in each of the four trailing quarters.
The stock has gained 3.8% over the past three months to close the last trading session at $21.40.
TRIP's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TRIP has an A grade for Quality and a B for Growth and Value. Within the 82-stock Internet industry, it is ranked #2.
Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for TRIP.
Yelp Inc. (YELP)
YELP operates a platform that connects consumers with local businesses in the United States and internationally. The company's platform covers various regional business categories. It also offers free and paid advertising products to businesses.
David Schwarzbach, YELP's chief financial officer, said, "Yelp's strong performance in 2022 demonstrate the strength of our broad-based local advertising platform and the momentum across our strategic initiatives. In 2023, we plan to continue our disciplined investments to drive shareholder value over the long term."
YELP's forward EV/Sales of 1.38x is 28.9% lower than the industry average of 1.95x, while its forward EV/EBITDA of 5.97x is 30.2% lower than the industry average of 8.55x.
YELP's revenue has grown at 5.6% and 7% CAGRs over the past three and five years, respectively. Its EBIT and EBITDA have grown at 24.7% and 11.5% CAGRs over the past three years, respectively.
YELP's net revenue increased 13.1% year-over-year to $309.10 million for the fiscal fourth quarter that ended December 31, 2022. Its adjusted EBITDA came in at $80.41 million, up 18% year-over-year. Its income from operations increased 70.4% year-over-year to $33.38 million for the same quarter.
For the fiscal first quarter (ending March 2023), YELP's EPS is estimated to come in at $0.49, up 197.9% year-over-year. Analysts expect YELP's revenue to increase 10.5% year-over-year to $305.74 million for the same period. The company surpassed revenue estimates in each of the four trailing quarters, which is impressive.
YELP lost marginally intraday to close its last trading session at $29.84.
YELP's POWR Ratings reflect a promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.
It also has an A grade for Quality and Value. Within the same industry, YELP is ranked #5.
To see YELP's ratings for Growth, Stability, Sentiment, and Momentum, click here.
Data Storage Corporation (DTST)
DTST provides multi-cloud information technology solutions in the United States. The company offers data protection and disaster recovery solutions, high availability, data vaulting, DRaaS, IaaS, message logic, standby server, support, maintenance, and internet solutions.
On October 24, 2022, DTST announced that its CloudFirst and Nexxis divisions had been ISO/IEC 27001:2013 certified. This certification illustrates that DTST has met rigorous international standards, demonstrating the company's efficiency.
DTST's forward EV/Sales of 0.12x is 95.6% lower than the industry average of 2.82x, while its forward Price/Sales of 0.53x is 80.6% lower than the industry average of 2.72x.
DTST's revenue has grown at 43.8% and 23.7% CAGRs over the past three and five years, respectively.
DTST's sales came in at $4.42 million for the third quarter that ended September 30, 2022, up 14.5% year-over-year. Its gross profit came in at $1.85 million, up 20.1% year-over-year. Its adjusted EBITDA rose 54.7% from its prior-year quarter to $162.39 thousand.
Analysts expect DTST's revenue and EPS to come in at $6.40 million and $0.01, respectively, for the fiscal first quarter ending March 2023. It surpassed EPS estimates in three of the four trailing quarters, which is impressive.
DTST gained marginally intraday to close the last trading session at $1.78.
It is no surprise that DTST has an overall B rating, which equates to Buy in our POWR Ratings system.
It has an A grade for Sentiment and a B for Value and Quality. It is ranked #6 within the same industry.
To see the additional POWR Ratings for Growth, Momentum, and Stability for DTST, click here.
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TRIP shares were unchanged in premarket trading Thursday. Year-to-date, TRIP has gained 19.02%, versus a 3.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy.Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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