The internet industry is poised for significant expansion, propelled by rising demand amid 5G adoption, digitization and government initiatives. Given the favorable industry trends, quality internet stocks Wix.com Ltd. (WIX), Shutterstock, Inc. (SSTK), and Travelzoo (TZOO) might elevate investors profit potential in the near term.
The adoption of private 5G networks is attaining traction globally as regulators allocate more spectrum for enterprises to build private 5G networks. Enterprises in the manufacturing sector are rapidly implementing 5G capabilities to support transformative applications associated with digital transformation, intelligent factories, and the Internet of Things (IoT).
As a result, the demand for global Private 5G network is expected to reach a value of around $41.80 billion by 2030, at a CAGR of about 49.7%.
Further, digital transformation across multiple industries, including retail, education, telecom and IT, financial services, hospitality, and manufacturing, have boosted the demand for wireless broadband services. The global wireless internet services market is expected to grow to $921.87 billion in 2027 at a CAGR of 7%.
In addition, the Department of Commerce’s National Telecommunications and Information Administration (NTIA) announced the availability of nearly $1 billion in funding to expand Internet access and adoption on Tribal Lands. This initiative is expected to grow the economy from the bottom up and middle out and lower costs for more families.
With these favorable trends in mind, let's delve into the fundamentals of the three internet stock picks.
Wix.com Ltd. (WIX)Headquartered in Tel Aviv, Israel, WIX develops and markets a cloud-based platform that enables to create a website or web application in North America, Europe, Latin America, Asia, and internationally.
WIX’s trailing-12-month gross profit margin of 65.95% is 35.5% higher than the industry average of 48.67%, while its trailing-12-month levered FCF margin of 8.77% is 8% higher than the industry average of 8.12%.
WIX’s revenues for the fiscal third quarter that ended September 30, 2023, increased 13.9% year-over-year to $393.84 billion. Its non-GAAP gross profit increased 20.6% year-over-year to $269.104 million and non-GAAP net income per share increased significantly year-over-year to $1.10.
The consensus revenue estimate of 402.79 million for the fiscal fourth quarter ending December 2023 represents a 13.5% increase year-over-year. Its EPS is expected to grow 60.8% year-over-year to $0.98 for the same quarter. Also, the company topped the consensus EPS and revenue estimates in each of the four trailing quarters, which is impressive.
The stock has gained 26.9% over the past month to close the last trading session at $99.26.
WIX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade in Growth and a B in Sentiment and Quality. It is ranked #3 out of 28 stocks in the Internet - Services industry.
Click here to see the other ratings of WIX (Value, Momentum, and Stability).
Shutterstock, Inc. (SSTK)
SSTK is a technology company that provides quality content, and creative workflow solutions in North America, Europe, and internationally.
On November 10, 2023, SSTK announced TRUST, an official guiding framework that embodies Shutterstock's long-standing values and commitment to using AI responsibly in its products and workflows.
On October 23, 2023, SSTK declared a quarterly dividend of $0.27 payable on December 14, 2023.
SSTK pays $1.08 annually as dividends which translates to a yield of 2.42% at the current price. Its four-year average dividend yield is 1.17%.
SSTK’s trailing-12-month gross profit margin of 61.02% is 24.8% higher than the industry average of 48.90%, while its trailing-12-month levered FCF margin of 12.27% is 60.6% higher than the industry average of 7.64%.
For the fiscal third quarter ended September 30, 2023, SSTK’s revenue increased 14.3% from the year-ago quarter to $233.25 million. Also, net income increased 23.3% year-over-year to $28.42 million and EPS increased 23.4% year-over-year to $0.79.
Analysts expect SSTK’s EPS for the fiscal fourth quarter ended December 31, 2023, to be $0.66. Its revenue is expected to increase 2.8% year-over-year to $223.91 million for the same quarter. Also, the company topped the consensus EPS estimates in each of the four trailing quarters.
The stock has gained 31.8% over the past month to close the last trading session at $44.68.
SSTK’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Quality, Growth, and Value. Within the same industry, it is ranked #4.
Beyond what is stated above, we’ve also rated SSTK for Momentum, Sentiment, and Stability. Get all SSTK ratings here.
Travelzoo (TZOO)
TZOO operates as an Internet media company that engages in the provision of travel, entertainment, and local deals from travel and entertainment companies, and
TZOO’s trailing-12-month gross profit of 86.67% is 77.2% higher than the industry average of 48.90%. Its trailing-12-month levered EBIT margin of 17.91% is 127.7% higher than the industry average of 7.87%.
For the fiscal third quarter that ended September 30, 2023, TZOO’s revenue increased 33% year-over-year to $20.60 million. The net income and income per share grew 201.1% and 166.7% from the prior year’s quarter to $2.40 million and $0.16, respectively.
Street expects TZOO’s revenue to increase 15.5% year-over-year to $21.49 million for the fiscal fourth quarter ending December 2023. Its EPS is expected to grow marginally year-over-year to $0.23 for the same quarter. Also, the company topped the consensus EPS and revenue estimates in three of the four trailing quarters.
Over the past month, the stock has surged 29% to close the last trading session at $8.89.
It’s no surprise that TZOO has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Quality, and B in Value and Sentiment. Within the Internet industry, it is ranked #4 out of 57 stocks.
In addition to the POWR Ratings stated above, one can access TZOO's ratings for Momentum, Growth, and Stability here.
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WIX shares were trading at $101.62 per share on Wednesday morning, up $2.36 (+2.38%). Year-to-date, WIX has gained 32.27%, versus a 20.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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