The internet industry is expected to grow in the face of rapid digitization. So, quality internet stocks eBay Inc. (EBAY), Yelp Inc. (YELP), and Fiverr International Ltd. (FVRR) could be ideal watchlist additions for growth investors.
The National Telecommunications and Information Administration (NTIA) of the Department of Commerce announced the availability of roughly $1 billion in funding to improve Internet access and adoption on tribal lands.
This initiative is part of President Biden’s Investing in America strategy and his economic plan, Bidenomics, to develop the economy from the bottom up and middle out while lowering costs for more families.
Moreover, the global e-commerce market is expected to reach $70.90 trillion by 2028, with a CAGR of 27.4%. The e-commerce market is expanding as a result of better targeting possibilities and interest-based targeting.
The global broadband internet services market is expected to grow to $470.49 billion in 2027 at a CAGR of 3.8%. Investors’ interest in Internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 14.2% gains over the past six months.
Take a detailed look at the stocks mentioned above:
eBay Inc. (EBAY)
EBAY operates marketplace platforms that connect buyers and sellers worldwide. The company’s platform includes its online marketplace at ebay.com and the eBay suite of mobile apps enabling users to list, buy, and sell various products.
On July 11, 2023, EBAY acquired Certilogo, an AI-powered apparel and fashion goods digital IDs and authentication provider. The deal enables the company to offer a ‘Secure by Design’ digital ID technology authentication to their apparel sector, creating prospects in the circular economy.
EBAY would be able to supply brands with safe, linked product solutions that are both flexible and adaptable as a result of this acquisition. Furthermore, it establishes EBAY as a trustworthy destination for pre-loved clothes and fashion, and it represents an important investment in the booming pre-loved fashion industry.
EBAY’s forward EV/EBITDA multiple of 7.56 is 21.7% lower than the industry average of 9.65. Its forward EV/EBIT multiple of 8.65 is 36.5% lower than the industry average of 13.62.
EBAY’s trailing-12-month levered FCF margin of 27.82% is 477.7% higher than the industry average of 4.81%. Its trailing-12-month EBIT margin of 23.48% is 222.7% higher than the industry average of 7.28%.
For the second quarter that ended June 30, 2023, EBAY’s net revenues increased 4.9% year-over-year to $2.54 billion, while its gross profit grew 3.6% from the year-ago value to $1.82 billion. Its non-GAAP net income from continuing operations increased marginally year-over-year to $555 million. Also, its non-GAAP EPS rose 4% from the prior-year quarter to $1.03.
EBAY’s revenues have increased at a CAGR of 5.5% over the past three years, while its EBIT has increased at a 1% CAGR.
The consensus revenue estimate of $10.15 billion for the year ending December 2023 represents a 3.6% increase year-over-year. Its EPS is expected to grow 2% year-over-year to $4.19 for the same period. It surpassed EPS estimates in all four trailing quarters. EBAY’s shares have gained marginally intraday to close the last trading session at $42.99.
EBAY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
EBAY has an A grade for Quality and a B for Growth. It is ranked #9 out of 59 stocks in the Internet industry. Click here for the additional POWR Ratings for Value, Momentum, Sentiment, and Stability for EBAY.
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.
YELP’s forward non-GAAP P/E multiple of 14.42 is 6% lower than the industry average of 15.34. Its forward non-GAAP PEG multiple of 0.51 is 65% lower than the industry average of 1.46.
YELP’s trailing-12-month ROTA of 4.14% is 168.8% higher than the industry average of 1.54%. Its trailing-12-month levered FCF margin of 22.66% is 183.1% higher than the industry average of 8.01%.
YELP’s net revenue increased 12.8% year-over-year to $337.13 million for the fiscal second quarter that ended June 30, 2023. Its adjusted EBITDA rose 25% year-over-year to $84 million. Its net income and EPS increased 83.9% and 90.9% year-over-year to $14.73 million and $0.21, respectively.
YELP’s revenue grew at a CAGR of 10.1% over the past three years.
Street expects YELP’s revenue to increase 11.4% year-over-year to $1.33 billion for the year ending December 2024. Its EPS is expected to grow 134.1% year-over-year to $2.85 for the same period. Over the nine past months, the stock has gained 38.8% to close the last trading session at $41.05.
YELP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked first in the same industry. It has an A grade for Growth and Quality and a B grade for Value. To see additional YELP’s ratings for Sentiment, Momentum and Stability, click here.
Fiverr International Ltd. (FVRR)
Headquartered in Tel Aviv, Israel, FVRR operates an online marketplace worldwide. Its platform enables sellers to sell their services and buyers to buy them.
FVRR’s forward non-GAAP P/E multiple of 15.78 is 9.8% lower than the industry average of 17.49.
FVRR’s trailing-12-month gross profit margin of 81.71x is 169.7% higher than the 30.30x industry average. Its trailing-12-month levered FCF margin of 8.18% is 49.7% higher than the 5.46% industry average.
In the second quarter that ended June 30, 2023, FVRR’s revenue increased 5.1% year-over-year to $89.39 million. Also, its gross profit stood at $73.75 million, up 9.3% year-over-year.
Its total assets came in at $971.62 million for the period that ended June 30, 2023, compared to $923.80 million for the period that ended December 31, 2022.
FVRR’s revenue grew at a CAGR of 35.2% over the past three years. In addition, its total assets grew at a CAGR of 33.9% over the past three years.
Analysts expect FVRR’s revenue to increase 7.3% year-over-year to $362.07 million for the year ending December 2023. Its EPS is expected to grow 150.8% year-over-year to $1.78 for the same period. It surpassed EPS estimates in all four trailing quarters. FVRR’s shares have lost marginally intraday to close the last trading session at $28.10.
It’s no surprise that FVRR has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Quality. It is ranked #8 in the same industry.
Beyond what is stated above, we’ve also rated FVRR for Value, Momentum, Sentiment and Stability. Get all FVRR ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
EBAY shares were trading at $42.83 per share on Monday morning, down $0.16 (-0.37%). Year-to-date, EBAY has gained 4.46%, versus a 14.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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