The Internet field is predicted to grow steadily due to the strengthening of digitalization measures and the rapid spread of the Internet. Increasing demand for online services and e-commerce platforms is also driving industry growth.
Therefore, investors may consider buying fundamentally strong Internet stocks like Meta Platforms, Inc. (META), Alphabet Inc. (GOOGL), and Yelp Inc. (YELP).
Before we dig deeper into the basics, let’s discuss what’s going on in the Internet industry.
According to DataReportal, 5.35 billion people worldwide will be using the internet in early 2024, accounting for 66.2% of the total population. Internet users continue to grow, and according to the latest data, the world’s connected population grew by 97 million people in the 12 months to January 2024.
The Internet industry is bound to grow amidst the global wave of digitalization. Additionally, the Biden-Harris Administration has approved $10 million for multi-use facilities for tribal communities under the U.S. Treasury Capital Projects Fund (CPF), which is designed to provide high-speed internet access to tribal communities. This should spur industry growth.
Additionally, the Digital Equity Act and the Broadband Equity, Access, and Deployment (BEAD) program aim to provide Americans with affordable, reliable, high-speed internet access. These programs are designed to advance the digital inclusion of Americans.
The Internet industry is becoming more popular due to e-commerce, cloud computing, the growth of IoT devices, on-demand digital services, remote work trends, and the expansion of online learning. The global internet services market is expected to reach $733.79 billion by 2031, growing at a CAGR of 4.4%.
Additionally, the growing deployment of 5G, the growing popularity of satellite internet, and the expansion of fiber optics will further fuel the growth of the internet industry. The global broadband internet services market is expected to grow to $500.57 billion in 2028 at a CAGR of 4%. Investor interest in Internet stocks is evidenced by the 47.7% rise in the Invesco Nasdaq Internet ETF (PNQI) over the past year.
Given these favorable trends, let’s take a look at the fundamentals of the three best internet stocks, starting with the third option.
Stock #3: Meta Platforms, Inc. (meta)
META develops products around the world that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables. The company operates in two segments: Family of Apps and Reality Labs.
In terms of common stock return over the past 12 months, META’s 28.04% beats the industry average of 2.93% by 855.6%. Similarly, the company’s trailing twelve month net profit margin of 28.98% is 874.8% higher than his industry average of 2.97%. Additionally, its trailing twelve month return on assets of 17.03% is significantly higher than the industry average of 1.33%.
META’s revenue for the fourth quarter ended December 31, 2023 increased 24.7% year over year to $40.11 billion. The company’s operating income increased 156% year-on-year to $16.38 billion. Net income was $14.02 billion and earnings per share were $5.33, representing year-on-year growth of 201.3% and 202.8%, respectively.
META’s revenue and EPS for the quarter ending March 31, 2024 are expected to be $36.07 billion and $4.31, up 25.9% and 95.8% year-over-year, respectively. Shares have increased 151.2% over the past year, closing at $507.76.
META’s POWR Rating reflects this promising outlook. The overall rating is B, which is equivalent to a “buy” according to our own rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weighting.
META has an A grade for quality and a B grade for sentiment. It ranks #13 out of 52 stocks in the Internet industry with a B rating. Click here to see additional ratings for META on Growth, Value, Momentum, and Stability.
Stock 2: Alphabet Inc. (Google)
GOOGL offers a variety of products and platforms. It operates through Google Services, Google Cloud and Other Bets segments. Google Services provides products and services including advertising, Android, Chrome, Gmail, Google Drive, and more. The Google Cloud segment provides infrastructure, cybersecurity, and data. The Other Betting segment sells health technology and internet services.
On February 6, 2024, GOOGL introduced Bard, an experimental conversational AI service powered by LaMDA. Initially released to trusted testers, it will eventually be made available to the wider public. Bard combines world knowledge with the power, intelligence, and creativity of large-scale language models (LLMs).
GOOGL’s trailing 12-month EBIT margin was 28.70%, which was 244% higher than the industry average of 8.34%. Return on total equity for the past 12 months was 18.40%, which was 454% higher than the industry average of 3.32%. Additionally, its trailing 12-month leveraged FCF margin of 19.08% is 136.7% higher than the industry average of 8.06%.
GOOGL’s revenue for the fourth quarter ended December 31, 2023 was $86.31 billion, an increase of 13.5% year over year. Operating revenue increased 30.5% from the previous year to $23.7 billion.
Additionally, net income was $20.69 billion, an increase of 51.8% year-on-year. Additionally, EPS was $1.64, an increase of 56.2% year over year.
GOOGL’s EPS and revenue for the quarter ending March 31, 2024 are expected to be $1.5 billion and $78.65 billion, up 28.3% and 12.7% year over year, respectively. Shares have increased 40.7% over the past year, closing at $147.60.
GOOGL’s strong fundamentals are reflected in its POWR Rating. The overall rating is B, which is equivalent to a “buy” according to our own rating system.
It ranks 7th in the industry. B grade for sentiment and quality. Click here to see additional ratings for GOOGL on Growth, Value, Momentum, and Stability.
Inventory #1: Yelp Inc. (shout)
YELP connects consumers and local businesses through its platform. We offer both free and paid advertising solutions, including pay-per-click search ads and multi-location advertising products. Additionally, businesses can deliver accurate search ads to local audiences and increase visibility through our Business Listing Pages product.
On January 30, 2024, YELP announced its winter product release introducing over 20 new features. Highlights include AI-powered business overview for faster decision-making, ratings from passionate reviewers, service updates to simplify connecting with the right experts, and more.
This release includes enhanced search filters for more accurate results and an improved user interface for easier navigation. Customers now enjoy a more seamless experience when searching for businesses and making informed choices.
YELP’s trailing twelve month return on assets of 9.77% is 634.6% higher than the industry average of 1.33%. Similarly, the company’s trailing 12-month leveraged FCF margin of 23.41% is 190.3% higher than his industry average of 8.06%. Additionally, the company’s trailing 12-month asset turnover ratio is 1.32x, which is 173.4% higher than the industry average of 0.48x.
YELP’s net revenue for the fourth quarter ended December 31, 2023 was $342.38 million, an increase of 10.8% from the same period last year. Adjusted EBITDA increased 19.5% year over year to $96.05 million. Additionally, net income and net income per share attributable to common stockholders increased 36% and 32.1% from the prior year period to $27.41 million and $0.37, respectively.
Analysts expect YELP’s revenue for the quarter ending March 31, 2024 to be $333.4 million, up 6.7% year-over-year. EPS for the quarter ending June 30, 2024 is expected to be $0.77, up 15.1% from the year-ago period. It beat consensus EPS estimates in each of the trailing four quarters. YELP stock has increased 28.8% over the past year, closing at $38.73.
It’s no surprise that YELP has an overall rating of A. This equates to a “Strong Buy” in the POWR rating system.
It has an A grade for value and quality and a B grade for growth. Ranked 2nd in the Internet industry. In addition to the above, we also evaluated YELP’s momentum, stability, and sentiment. Get all YELP ratings here.
What’s next?
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GOOGL stock was trading at $150.13 per share Friday morning, up $2.53 (+1.71%). Year-to-date, GOOGL has increased his 7.47%. In comparison, the benchmark S&P 500 index rose 10.19% in the same period.
About the author: Rashmi Kumari
Rashmi has a passion for capital markets, asset management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With her Master’s degree in Commerce, she hopes to make complex financial issues easier to understand for individual investors and help them make good investment decisions. more…
