As industries worldwide undergo digital transformation, integrating internet-based solutions to enhance efficiency, communication, and customer engagement, the Internet industry is experiencing a significant boost.
Against this backdrop, investors could secure quality internet stocks Expedia Group, Inc. (EXPE), Dingdong (Cayman) Limited (DDL), and Similarweb Ltd. (SMWB) this month.
Globally, the internet is reshaping communication, organization, and information sharing, exerting a significant impact on individuals and economies. Last year, approximately 5.30 billion people, representing about two-thirds of the world's population, were connected to the Internet, underscoring its pervasive role in daily life.
Besides, the internet services market in the United States has been experiencing significant growth in recent years, driven by the surge in digitalization, growth of e-commerce, and the emergence of new technologies.
Moreover, as per Forbes, the concept of the "immersive internet" marks the forthcoming evolution of online experiences this year, transcending traditional web content with the incorporation of technologies like augmented reality (AR) and virtual reality (VR).
In addition, ongoing technological advancements, such as the development of high-speed broadband, 5G networks, and improved infrastructure, contribute to the expansion of Internet services. The growth in the global internet services industry is also propelled by a combination of technological advancements, increased digitalization across various sectors, and the rising demand for diverse online activities and services.
The global internet services market is projected to reach a revised size of $916.50 billion by 2030, growing at a CAGR of 8.2%.
Furthermore, the increasing global accessibility of internet services has paved the way for a heightened demand for internet bandwidth. This surge is propelled by the expansion of cloud-based applications and the soaring popularity of audio-video streaming and video-on-demand services.
Considering these conducive trends, let's take a look at the fundamentals of the three internet stocks.
Expedia Group, Inc. (EXPE)
EXPE is a global player in online travel, offering various travel services and places to stay through popular brands like Expedia, Hotels.com, Vrbo, and Trivago. It serves vacationers and business travelers with perks like loyalty programs and advertising services.
EXPE’s trailing-12-month gross profit margin of 86.91% is 145.7% higher than the 35.38% industry average. Its trailing-12-month levered FCF margin of 16.73% is 218.5% higher than the industry average of 5.25%.
On November 2, 2023, EXPE announced a new stock repurchase authorization of $5 billion, supplementing the existing share repurchase authorization of the company.
In the third quarter ended September 30, 2023, EXPE’s revenue amounted to $3.93 billion, up 8.6 year-over-year. Gross bookings were up 7.1% from the year-ago quarter to $25.69 billion. Its adjusted EBITDA grew 12.7% year-over-year to $1.22 billion. Also, adjusted EPS increased 33.6% from the prior-year quarter to $5.41.
EXPE’s revenue and EPS are expected to grow 10% and 42.4% year-over-year to $12.83 billion and $9.67, respectively, in the fiscal year that ended December 2023.
The stock rose 65.4% over the past year and 46.8% over the past three months to close the last trading session at $144.99.
EXPE’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 are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
EXPE has an A grade for Quality and a B for Value. Within the B-rated Internet industry, it is ranked #17 out of 55 stocks.
Click here for EXPE’s additional Growth, Momentum, Stability, and Sentiment ratings.
Dingdong (Cayman) Limited (DDL)
Based in Shanghai, China, DDL is an e-commerce company that operates as an on-demand e-commerce company. The company offers vegetables, fresh produce, fruits, seafood products, meat, and eggs. It also provides ready-to-eat, ready-to-cook, and ready-to-heat products, as well as dairy and bakery products. DDL operates as a self-operated online retail business, primarily through Dingdong Fresh.
DDL’s trailing-12-month asset turnover ratio of 2.46x is 194.5% higher than the 0.84x industry average.
In the fiscal third quarter, which ended September 30, DDL’s total revenues amounted to RMB5.14 billion (722.48 million). Its non-GAAP net income came in at RMB15.51 million ($2.18 million), compared to a loss of RMB285.17 million ($40.08 million) in the prior-year quarter. Moreover, its non-GAAP net income per share stood at RMB0.04, compared to a loss of RMB0.89 in the year-ago quarter.
Street expects DDL’s revenue to amount to $3.09 billion for the year ending December 2024, representing a 9.8% increase year-over-year. Its EPS is expected to grow 334.4% year-over-year to $0.15 for the same year.
The stock gained 1.4% intraday to close the last trading session at $1.50.
DDL’s solid 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 has a B grade for Value and Growth. It is ranked #11 in the Internet industry.
To see DDL’s additional Sentiment, Momentum, Stability and Quality ratings, click here.
Similarweb Ltd. (SMWB)
Headquartered in Givatayim, Israel, SMWB provides a platform for digital intelligence in the United States, Europe, Asia Pacific, the United Kingdom, Israel, and internationally. It offers digital research intelligence solutions that allow senior leaders, strategy, business intelligence, and consumer insights teams to benchmark performance against competitors and market leaders.
SMWB’s trailing-12-month gross profit of 76.93% is 56.6% higher than the industry average of 49.14%. Its trailing-12-month asset turnover ratio of 0.90x is 46.4% higher than the industry average of 0.62x.
On December 11, 2023, SMWB announced the release of the 2024 Marketing Benchmark Report, a free resource for digital marketers to understand the competitive landscape and enhance their performance.
The report, developed in collaboration with HypeAuditor, focuses on seven US industries and highlights the growing significance of influencer marketing as a pivotal force in shaping brand narratives and connecting with audiences.
During the fiscal third quarter that ended September 30, 2023, SMWB’s number of customers grew 12% year-over-year to 4,371. As a result, its revenue increased 9.6% year-over-year to $54.83 million. Non-GAAP gross profit amounted to $45.58 million, up 19.6% from the year-ago quarter. The company reported a non-GAAP operating income of $1.07 million, compared to a loss of $13.35 million in the prior-year quarter.
In the fiscal fourth quarter ended December 2023, the company anticipates total revenue in the range of $55.50 million to $56 million, reflecting a year-over-year growth of approximately 9% at the midpoint. The non-GAAP operating profit is estimated to be between $0.50 million and $1 million. The company also aims to achieve sustained positive free cash flow in the fourth quarter.
For the fiscal year ended December 2023, analysts expect SMWB’s EPS to increase 92.3% from the previous year. Its revenue is likely to rise 12.3% year-over-year to $216.97 million in the same year. Also, the company topped the consensus EPS estimates in each of the four trailing quarters, which is notable.
Over the past month, the stock has surged 8.3% to close the last trading session at $5.33.
It’s no surprise that SMWB has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Sentiment and a B in Growth. Within the 28-stock Internet - Services industry, it is ranked #3.
In addition to the POWR Ratings stated above, one can access SMWB’s ratings for Value, Momentum, Quality, and Stability here.
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EXPE shares were trading at $146.85 per share on Thursday morning, up $1.86 (+1.28%). Year-to-date, EXPE has declined -3.25%, versus a -1.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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