The Internet industry is thriving with the Internet’s widespread integration into daily life, its transformative impact on work, communication, shopping, and leisure. The Internet has revolutionized online shopping, entertainment platforms, and digital financial services. As various sectors move towards digitalization, the Internet industry is expected to play a vital role in its growth.
Against this backdrop, it might be wise to add fundamentally strong internet stocks eBay Inc. (EBAY), MercadoLibre Inc. (MELI), and Netflix Inc. (NFLX) to your watchlist.
Before we dive deeper into the fundamentals of these stocks, let’s discuss why the Internet industry is well-positioned for growth.
As of January 2024, 5.35 billion people around the world were using the internet, of which 5.04 billion were actively participating in social media, representing 62.3 of the world’s population. Equivalent to %. The global internet services market is expected to grow significantly and reach $733.79 billion by 2031, growing at a staggering CAGR of 4.4% from 2023 to 2031 .
Additionally, the growing need for budget-friendly smart wireless devices is expected to drive the expansion of the wireless internet sector. The global wireless internet services market is projected to reach $921.97 billion by 2027, growing at a CAGR of 7%.
The Internet has played an important role in the growth of online shopping. Statista estimates that the US e-commerce market will continue to grow, with total revenue estimated between 2024 and 2028 to reach a new peak of $1.3 trillion in 2028, increasing by $475.2 billion. We predict it will reach $1 billion.
The e-commerce market is expected to reach $8.8 trillion in 2024 and is projected to grow at a CAGR of 15.8% from 2024 to 2029 to reach $18.81 trillion by 2029. Masu.
With the proliferation of the internet, people have become aware of the benefits of digital financial services. Digital financial services offer users control over their finances, the convenience of transacting from anywhere, transparency and security, and more. The total transaction value of the digital payments market is predicted to reach $11.55 trillion in 2024. It is expected to reach a total of $16.62 trillion by 2028, at a CAGR of 9.5%.
On the other hand, the introduction of high-speed internet and advancements in technology have paved the way for the growth of video streaming platforms. The Internet is helping video streaming companies expand into new geographies and cater to different audiences.
The global video streaming market revenue is expected to reach $508.8 billion by 2030, growing at a projected CAGR of 21.6% from 2024 to 2030. This growth is driven by increasing consumer demand for flexible, on-the-go access to diverse, real-world content. -Time content and increasing number of video-on-demand users worldwide.
In addition, the introduction of 5G, which offers significantly faster speeds and increased network density, will foster innovation and economic expansion, improve consumer experience, and thereby contribute to the growth of the internet industry. The global 5G services market is expected to reach $2.21 trillion, growing at a staggering CAGR of 59.4% from 2023 to 2030.
Investor interest in Internet stocks is evidenced by the 42.1% return of the Invesco Nasdaq Internet ETF (PNQI) over the past year.
With these favorable trends in mind, let’s take a look at the fundamentals of the three internet stocks mentioned above.
Inventory #3: eBay Inc. (ebay)
EBAY operates a marketplace platform that connects buyers and sellers in the United States and internationally. The company’s marketplace platforms include the eBay.com online marketplace and his eBay suite of mobile apps. Its platform allows users to list, buy, and sell a variety of products.
In terms of gross profit margin over the past 12 months, EBAY’s 72.13% is 101.7% higher than the industry average of 35.77%. 12-month capital expenditures/sales of 4.80% is 57.1% higher than the industry average of 3.06%. However, the company’s trailing 12-month asset turnover ratio is 0.50x, which is 49.5% lower than the industry average of 0.99x.
EBAY’s net revenues for the fiscal third quarter ended September 30, 2023 increased 5% from the prior year period to $2.5 billion. Gross trading profit increased 3.6% year-on-year to $1.8 billion. Additionally, non-GAAP EPS increased 3% year over year to $1.03.
Street expects EBAY’s EPS and revenue for the quarter ending March 31, 2024 to be $1.13 billion and $2.53 billion, up 1.8% and 0.9% year over year, respectively. There is. He beat consensus EPS estimates in each of the subsequent four quarters. Shares have increased 4.9% over the past three months, closing the last trade at $42.62.
EBAY’s POWR rating reflects an uncertain outlook. The overall rating is C, which equates to neutral according to our own rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weighting.
It is rated C for Value, Stability, and Sentiment. In the Internet industry, it is ranked 23rd out of 51 stocks. Click here to see EBAY’s ratings on Growth, Momentum, and Quality.
Stock #2: MercadoLibre, Inc. (Meri)
MELI is headquartered in Montevideo, Uruguay and operates an online commerce platform in Latin America. It operates in two segments: Mercado Libre Marketplace and Mercado Pago FinTech platform. The company provides an automated online marketplace for buying and selling and a financial technology platform for online transactions and payments.
In terms of trailing 12-month EBITDA margin, MELI’s 18.50% is 70.8% higher than the industry average of 10.83%. The trailing 12-month leveraged FCF margin is 26.54%, which is 377.3% higher than the industry average of 5.56%. On the other hand, the company’s trailing 12-month asset turnover ratio is 0.94x, which is 4.8% lower than the industry average of 0.99x.
MELI’s total net revenues for the fiscal third quarter ended September 30, 2023 increased 47.9% year-over-year to $1.99 billion. Net income and EPS were $359 million, or $7.16, an increase of 178.3% and 179.7% year over year. However, the company’s total current liabilities were $10.31 billion, an increase of 20.4% compared to $8.56 billion as of December 31, 2022.
MELI’s EPS for the quarter ending December 31, 2023 is expected to be $7.02, an increase of 116.1% year-over-year. Similarly, revenue for the quarter is expected to be $4.13 billion, up 37.6% year-over-year. The company significantly beat consensus EPS estimates in each of the subsequent four quarters. Shares rose 52.8% over the past year, closing at $1,771.83.
MELI’s bleak outlook is reflected in its POWR rating. The overall rating is C, which equates to neutral according to our own rating system.
Stability is C grade. It ranks 18th in the industry. Click here to see MELI’s growth, value, momentum, sentiment and quality ratings.
Stock #1: Netflix, Inc. (NFLX)
NFLX provides entertainment services. We offer TV series, documentaries, feature films, and mobile games in a variety of genres and languages. The Company offers members the ability to receive streaming content through a number of Internet-connected devices, including televisions, digital video players, television set-top boxes, and mobile devices.
In terms of trailing 12-month EBIT margin, NFLX’s 20.62% was 147.5% higher than the industry average of 8.33%. The trailing 12-month leveraged FCF margin of 57.48% is 625.3% higher than the industry average of 7.93%. Furthermore, the company’s trailing twelve month return on common equity was 26.15%, which is 523.6% higher than the industry average of 4.19%.
NFLX’s revenue for the fourth quarter ended December 31, 2023 was $8.83 billion, an increase of 12.5% from the same period last year. The company’s operating income was $1.5 billion, an increase of 172% from the same period last year. Additionally, net income and EPS increased significantly year over year to $938 million and $2.11, respectively.
Analysts expect NFLX’s EPS and revenue for the quarter ending March 31, 2024 to be $4.51 billion and $9.27 billion, up 56.7% and 13.5% year over year, respectively. ing. It beat consensus EPS estimates in three of the subsequent four quarters. NFLX stock has increased 76.7% over the past nine months, closing at $593.46.
It’s no surprise that NFLX has an overall rating of B. This corresponds to a “buy” rating in our own rating system.
It is ranked 17th in the Internet industry. In terms of quality, it is B grade. Click here to see NFLX Growth, Value, Momentum, Stability, and Sentiment ratings.
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NFLX stock was trading at $587.17 per share Friday afternoon, down $6.29, or -1.06%. Year-to-date, NFLX has increased his 20.60%. In comparison, the benchmark S&P 500 index rose 5.67% in the same period.
About the author: Abhishek Bhuyan
Abhishek began his professional journey as a financial journalist because of his keen interest in determining the fundamental factors that influence the future performance of financial products. more…
