The internet industry is expected to thrive due to accelerating digitalization, smart infrastructure expansion, and government initiatives. So, quality internet stocks Meta Platforms, Inc. (META), Tripadvisor, Inc. (TRIP), and Despegar.com, Corp. (DESP) could be wise additions to your portfolio for growth.
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.
Secretary of Commerce Gina Raimondo said, “Access to Internet is no longer a luxury, and thanks to President Biden’s leadership, we are taking action to close the digital divide for everyone in America. The Middle Mile program will invest more than $900 million in the infrastructure needed to connect communities, military bases, and Tribal lands to the Internet, lower the cost of access, and increase bandwidth.”
The global internet service market is expected to grow at a CAGR of 4.4% until 2029. The market is growing steadily, and with key players increasingly adopting strategies, the market is likely to grow.
Investors’ interest in internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 49.9% gains over the past nine months.
Take a detailed look at the stocks mentioned above:
Meta Platforms, Inc. (META)
META engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments, Family of Apps and Reality Labs.
META’s forward non-GAAP PEG of 1.14% is 23.4% lower than the industry average of 1.49%.
META’s trailing-12-month ROTA of 10.91% is 607.8% higher than the industry average of 1.54%. Its trailing-12-month asset turnover ratio of 0.64x is 31.6% higher than the industry average of 0.49x.
META’s revenues for the fiscal second quarter that ended June 30, 2023, increased 11% year-over-year to $32 billion, while its income from operations stood at $9.39 billion, up 12.4% year-over-year. The company’s net income and EPS came in at $7.79 billion and $2.98, up 16.5% and 21.1% from the prior-year quarter, respectively.
META’s revenue grew at CAGR of 17.1% over the past three years. In addition, its total assets grew at 14% CAGR over the past three years.
The consensus revenue estimate of $60.90 billion for the year ending March 2024 represents a significant increase year-over-year. Its EPS is expected to grow 30.3% year-over-year to $1.10 for the same period. It surpassed EPS estimates in three of four trailing quarters.
META’s shares have gained 71.9% over the past nine months to close the last trading session at $12.43.
META’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
META has an A grade for Sentiment and Quality and a B grade for Growth. It is ranked #7 out of 58 stocks in the Internet industry. Click here for the additional POWR Ratings for Value, Momentum, and Stability for META.
Tripadvisor, Inc. (TRIP)
TRIP operates as an online travel company in two segments, Hotels, Media & Platforms; and Experiences & Dining. Also, the company operates TripAdvisor-branded websites, including tripadvisor.com in the U.S., and localized versions of the website in 40 markets and 20 languages.
TRIP’s forward EV/Sales of 1.17x is 36.4% lower than the industry average of 1.84x. Its forward EV/EBITDA of 6.56x is 22.9% lower than the industry average of 8.51x.
TRIP’s trailing-12-month gross profit margin of 92.07% is 86.1% higher than the industry average of 49.49%, while its trailing-12-month levered FCF margin of 18.27% is 145.8% higher than the industry average of 7.43%.
For the fiscal second quarter ended June 30, 2023, TRIP’s revenue increased 18.5% year-over-year to $494 million. Its total current assets came in at $1.48 billion for the period that ended June 30, 2023, compared to $1.27 billion for the period that ended December 31, 2022. Also, its total assets came in at $2.73 billion, compared to $2.57 billion for the same period.
TRIP’s revenues have increased at a CAGR of 15.2% over the past three years, while its EBITDA has increased at a 286% CAGR.
Street expects TRIP’s EPS for the year ending December 31, 2023, to come in at $0.96. Over the past three months, the stock has gained 4.7% to close the last trading session at $16.36.
It’s no surprise that TRIP has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality and a B for Value and Momentum. It is ranked #10 in the same industry.
Beyond what is stated above, we’ve also rated TRIP for Growth, Sentiment, and Stability. Get all TRIP ratings here.
Despegar.com, Corp. (DESP)
Based in Buenos Aires, Argentina, DESP, an online travel company, provides a range of travel and travel-related products to leisure and corporate travelers through its websites and mobile applications in Latin America and the United States. The company operates in two segments, Travel Business, and Financial Services Business.
DESP’s forward EV/Sales of 0.85x is 29% lower than the industry average of 1.20x. Its forward EV/EBITDA of 6.48x is 34.5% lower than the industry average of 9.89x.
DESP’s trailing-12-month gross profit margin of 67.25% is 89.9% higher than the industry average of 35.41%, while its trailing-12-month levered FCF margin of 13.91% is 206.8% higher than the industry average of 4.53%.
For the fiscal first quarter ended March 31, 2023, DESP’s total revenue increased 41.2% year-over-year to $158.71 million. The company’s gross profit increased 54.1% year-over-year to $107.68 million. In addition, its total adjusted EBITDA increased 154.4% year-over-year to $17.30 million.
DESP’s revenues have increased at a CAGR of 7.7% over the past three years, while its total assets have increased at a 12.6% CAGR.
Analysts expect DESP’s EPS for the year ending December 31, 2023, to come in at $0.21. The stock has gained 60.3% over the past three months to close the last trading session at $8.45.
DESP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #4 in the same industry. It has a B grade for Growth, Value and Momentum. To see additional DESP ratings for Sentiment, Stability, and Quality, click here.
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META shares were trading at $310.75 per share on Monday morning, up $0.02 (+0.01%). Year-to-date, META has gained 158.23%, versus a 18.28% 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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