The growing penetration of the internet globally and the rapid digitalization of business operations across almost every sector have positioned the internet industry for substantial growth and expansion this year and beyond. The introduction of new, innovative digital technologies like 5G has further amplified the industry’s prospects.
Thus, to capitalize on the industry’s growth trajectory, we think it could be wise to invest in fundamentally sound internet stocks Booking Holdings Inc. (BKNG), Expedia Group, Inc. (EXPE), and CarGurus, Inc. (CARG) for solid returns.
Let’s understand this in detail.
As digitalization is gaining momentum globally, businesses and individuals increasingly rely on fast and uninterrupted internet connections for information, education, communication, and leisure. As of 2023, internet users make up 64.4% of the global population, with a staggering 5.16 billion active users across the globe.
The industry is witnessing significant growth through businesses leveraging a solid online presence, expanding offerings, broadening reach, and operating round the clock across multiple e-commerce platforms. This year, the global e-commerce market is projected to reach $6.30 trillion and more than $8.10 trillion by 2026.
The advent of 5G technology is further driving the burgeoning growth of the internet sector by providing faster internet speeds and enhanced connectivity. The utilization of fixed wireless access, cloud-based infrastructure, and the increasing adoption of Internet of Things (IoT) devices also reinforce the industry’s promising outlook.
According to a report by ReportLinker, the global wireless internet services market is estimated to grow at a 7% CAGR, reaching $921.97 billion by 2027.
Moreover, investors’ interest in internet stocks is evident from the First Trust Dow Jones Internet Index Fund’s (FDN) 36.6% returns over the past six months.
Given the industry’s promising growth prospects, quality internet stocks BKNG, EXPE, and CARG could be ideal investments now.
Let’s take a closer look at the fundamentals of these stocks.
Booking Holdings Inc. (BKNG)
BKNG provides travel and restaurant online reservations and related services. Its brands include Booking.com, Priceline.com, agoda.com, Rentalcars.com, KAYAK, and OpenTable. The company offers accommodation reservation services in more than 220 countries, with 400,000 properties available in over 40 languages.
On June 28, Agoda, BKNG’s Asia-based digital travel platform, announced its foray into wholesale distribution. Renowned for its strategic partnership solutions and white-label product, Agoda is utilizing its expertise to develop a cutting-edge wholesale distribution platform.
The unique feature of Agoda’s product lies in its transparency and flexibility, empowering hotel chains to monitor distributor activity and gain enhanced visibility into rate and inventory consumption. By introducing this innovation, Agoda aims to strengthen its bond with global hotel partners and simplify the intricate distribution process.
On June 27, BKNG announced its new AI Trip Planner, launched in beta to a selection of U.S. travelers. The company offers a conversational and intuitive trip-planning experience by incorporating OpenAI’s ChatGPT API. This innovative launch should bode well for the company.
For the first quarter that ended March 31, 2023, BKNG’s revenues increased 40.2% year-over-year to $3.78 billion. Its adjusted EBITDA grew 89% from the year-ago value to $586 million. Also, the company’s net income and net income per share stood at $266 million and $7, compared to a loss and loss per share of $700 million and $17.10 in the prior year’s period, respectively.
The consensus revenue estimate of $20.65 billion for the fiscal year (ending December 2023) reflects a 20.8% year-over-year improvement. Likewise, the consensus EPS estimate of $137.76 for the ongoing year indicates a 38% rise year-over-year. Moreover, the company topped the consensus EPS estimates in all four trailing quarters, which is impressive.
Over the past six months, the stock has gained 36.1% to close the last trading session at $2,666.47.
BKNG’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BKNG has an A grade for Quality and a B for Momentum. It is ranked #9 in the 58-stock Internet industry.
In addition to the POWR Ratings I’ve just highlighted, you can see BKNG’s ratings for Growth, Value, Stability, and Sentiment here.
Expedia Group, Inc. (EXPE)
EXPE is an online travel company. Its Retail segment provides global travel and advertising services, while the B2B segment focuses on Expedia Partner Solutions. Additionally, the Trivago segment generates ad revenue through referrals to online travel companies and service providers via its hotel metasearch websites.
On May 1, 2023, EXPE and SoFi Technologies, Inc. (SOFI) introduced ‘SoFi Travel powered by Expedia,’ enabling SoFi members to save money and earn rewards while traveling. Through the SoFi Travel portal, members can conveniently book flights, hotels, car rentals, travel packages, and experiences at discounted SoFi Member Prices.
EXPE will facilitate the travel search and booking system, ensuring a smooth booking experience via the SOFI app or website. Members will have access to EXPE’s full customer service team for assistance with bookings and travel. Such partnerships enable EXPE to expand its operations and contribute to an improved user experience.
Also, on April 19, Expedia Group Media Solutions, EXPE’s global travel advertising platform, launched a new media platform that allows travelers to shop and book travel while watching travel content. Through a partnership with Brand USA, EXPE aims to leverage this “shoppable” technology to connect streamed movies and TV with travel marketing, boosting travel bookings.
For the first quarter that ended March 31, 2023, EXPE’s revenue increased 18.5% year-over-year to $2.67 billion. Its adjusted EBITDA grew 6.9% from the year-ago value to $185 million. Furthermore, cash inflow from operating activities rose 5.5% year-over-year to $3.16 billion.
Analysts expect EXPE’s revenue to grow 10.8% year-over-year to $12.92 billion for the fiscal year ending December 2023. Similarly, the company’s EPS is expected to come in at $9.37 for the current year, a 38% year-over-year improvement. Moreover, the company surpassed its consensus revenue estimates in three of the trailing four quarters.
The stock has gained 29.4% over the past six months to close the last trading session at $108.33.
EXPE’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
EXPE has an A grade for Quality and a B for Growth, Value, and Momentum. It is ranked #5 out of 58 stocks within the Internet industry.
Click here to access additional EXPE ratings (Stability and Sentiment).
CarGurus, Inc. (CARG)
CARG operates an online automotive marketplace connecting buyers and sellers of new and used cars. Its segments include U.S. Marketplace and Digital Wholesale. The company runs online marketplaces across Canada, the United Kingdom, and the United States under CarGurus, Autolist, CarOffer, and PistonHeads brands.
On June 26, CARG announced the launch of the CarGurus ChatGPT plugin to assist shoppers in finding their ideal car match more quickly. By improving the user experience, this innovative solution is expected to draw in more clients, boost sales, and ultimately generate profit for the business.
For the first quarter that ended March 31, 2023, CARG’s marketplace revenue increased 2.4% year-over-year to $167.13 million. Its interest income grew significantly from the year-ago value to $3.74 million. Also, its net other income came in at $595 thousand, compared to a loss of 156 thousand in the prior year’s period.
Furthermore, as of March 31, 2023, the company’s total assets stood at $1.05 billion, compared to $927.10 million as of December 31, 2022.
The consensus revenue estimate of $1.08 billion for the fiscal year (ending December 2024) reflects a 14.6% year-over-year improvement. Likewise, the consensus EPS estimate of $1.04 for the same period indicates a 9.2% rise year-over-year. Moreover, the company surpassed the consensus revenue and EPS estimates in three of four trailing quarters.
Shares of CARG have gained 70.7% over the past six months to close the last trading session at $22.76.
CARG’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
CARG has an A grade for Quality and a B for Value and Sentiment. It has ranked #6 out of 58 stocks within the same industry.
Click here to access additional CARG ratings for Momentum, Stability, and Growth.
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BKNG shares were unchanged in premarket trading Thursday. Year-to-date, BKNG has gained 32.31%, versus a 15.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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