The internet industry is expected to remain healthy thanks to growing digitization, increasing number of smart infrastructures and government initiatives. So, quality internet stocks Yelp Inc. (YELP), trivago NV (TRVG), and Travelzoo (TZOO) might be wise additions to your portfolio now.
The National Telecommunications and Information Administration (NTIA) has cleared $930.02 million to build high-speed Internet infrastructure per average mile in 35 states and Puerto Rico. This effort, which is part of President Biden’s Investing in America plan, aims to increase data capacity and resiliency, while also connecting underserved regions to the Internet backbone.
Commerce Secretary Gina Raimondo said, Internet access 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, reduce access costs and increase bandwidth.
The industry is growing amid increasing populations, urbanization and smart infrastructure. Furthermore, the Internet of Things market is projected to grow at a CAGR of 13% from 2023 to 2026.
Investor interest in internet stocks is evident by the First Trust Dow Jones Internet Index Fund (FDN) returns of 35.3% over the past six months.
Take a detailed look at the actions mentioned above:
Yelp Inc. (YEL)
YELP operates a platform that connects consumers with local businesses across the United States and internationally. The company’s platform covers various regional business categories. It also offers free and paid advertising products to businesses.
YELP’s non-GAAP forward P/E multiple of 13.15 is 12.2% lower than the industry average of 14.97. Its EV/Sales forward multiple of 1.69 is 8.1% lower than the industry average of 1.84.
YELP’s 12-month ROTA of 3.53% is 138.7% higher than the industry average of 1.48%. Its 12-month leveraged FCF margin of 19.28% is 162.4% higher than the industry average of 7.35%.
YELP’s net revenues increased 12.9% year over year to $312.44 million for the fiscal first quarter ended March 31, 2023. Adjusted EBITDA increased 12.3% year over year to 54, 03 million dollars. Its net cash from operating activities increased 23.9% year over year to $74.24 million.
Consensus revenue estimate of $1.30 billion for the year ending December 2023 represents a 9.3% year-over-year increase. Its EPS is expected to grow 128.4% year over year to $2.78 for the same period. Shares of YELP have gained 28.8% over the past six months to close the latest trading session at $36.47.
YELP’s POWR ratings reflect this promising outlook. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. POWR ratings evaluate stocks based on 118 different factors, each with its own weighting.
YELP has an A rating for Quality and a B rating for Value. Within the Internet sector, it ranks third out of 57 stocks. Click here for more POWR ratings for growth, momentum, sentiment, stability and quality for YELP.
trivago NV (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates a global hotel and accommodation search platform. The company offers online meta-search for hotels and accommodations through online travel agencies, hotel chains and independent hotels.
TRVG’s EV/Sales forward of 0.31x is 83.2% lower than the industry average of 1.84x. Its forward EV/EBIT of 2.61x is 82.8% lower than the industry average of 15.15x.
TRVG’s 12-month EBIT margin of 11.55% is 35% higher than the industry average of 8.56%, while its 12-month gross profit margin of 97.64% is higher of 96.9% compared to the industry average of 49.59%.
During the fiscal first quarter ended March 31, 2023, total revenues of TRVG increased 9.2% year over year to 111.04 million ($121.09 million). Its operating income came in at 14.76 million ($16.10 million) compared to an operating loss of 4.84 million ($5.28 million) in the year-ago quarter.
Additionally, the company reported EPS of 0.03 compared to a net loss per share of 0.03 in the year-ago quarter.
Street expects TRVG’s revenue to grow 8.2% year over year to $648.94 million for the year ending December 2024. Its EPS is expected to grow 8% year over year to 0 $.23 for the same period. Over the past month, the stock has gained 14.7% to close the last trading session at $1.33.
Unsurprisingly, TRVG has an overall A rating, equivalent to a strong buy in our POWR ratings system. It has an A grade for quality and a B grade for growth, value and momentum. It ranks first in the same industry.
In addition to the above, we also rated TRVG for sentiment and stability. Get all TRVG ratings here.
Travel Zoo (ZOO)
TZOO is a global internet media company offering travel, entertainment and lifestyle experiences. The company’s segments include Travelzoo North America; Travelzoo Europe; and Jack’s Flight Club.
On May 11, 2023, TZOO announced the launch of its Travelzoo META member-only service to one million founding members, ushering in a new era of travel.
This innovative platform offers users unique travel experiences in the Metaverse, allowing them to explore and experience virtual travel adventures. TZOO META seeks to reinvent the future of travel by leveraging the possibilities of the Metaverse, offering a new approach for people to immerse themselves in travel experiences.
TZOO’s forward EV/EBIT of 8.26 times is 45.3% lower than the industry average of 15.09 times. Its forward EV/EBITDA of 6.28x is 26.7% lower than the industry average of 8.56x.
TZOO’s trailing 12-month ROCE of 236.98% is significantly higher than the industry average of 3.29%, while trailing 12-month ROTC of 34.05% is 789.6% higher than the industry average by 3.83%.
In the fiscal first quarter ended March 31, 2023, TZOO revenues increased 17.1% year over year to $21.60 million. The company’s non-GAAP operating income increased 105.4% over the prior year quarter to $5.54 million.
In addition, net income attributable to TZOO increased 55.7% year over year to $3.67 million, while EPS increased 21.1% year-over-year to $0.23 .
Analysts expect TZOO’s revenue to grow 19.4% year over year to $84.32 million for the year ending December 2023. EPS is forecast to grow 55.7% year over year at $0.87 for the same period. The stock has gained 65.9% over the past nine months, closing the last trading session at $8.13.
TZOO’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
It ranks second in the same industry. It has an A grade for Sentiment and Quality and a B grade for Growth and Momentum. To view more TZOO ratings for value and stability, click here.
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YELP shares were flat in pre-market trading on Thursday. Year-to-date, YELP has gained 33.39%, compared with a 16.75% increase in the benchmark S&P 500 over 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 issues understandable to individual investors and help them make appropriate investment decisions. Moreover…
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