The internet industry is expected to thrive due to accelerating digitalization, smart infrastructure expansion, and government initiatives. So, quality internet stocks Liberty TripAdvisor Holdings, Inc. (LTRPA), Vitru Limited (VTRU), and Similarweb Ltd. (SMWB) could be worth adding to your watchlist.
The National Telecommunications and Information Administration (NTIA) of the Department of Commerce announced approximately $50 million in funding for four groups to build middle mile high-speed Internet infrastructure in New Hampshire, Tennessee, Virginia, and Wyoming, should drive growth for the industry.
The program is part of the Biden-Harris Administration’s Internet for All effort, which aims to provide affordable, dependable high-speed Internet access to all Americans.
Secretary of Commerce Gina Raimondo, said, “Building robust middle mile networks is a vital step to ensuring every community has access to reliable and affordable high-speed Internet service. This investment in Internet infrastructure, made possible by President Biden and his Investing in America agenda, will help close the digital divide and deliver the benefits and tools of our interconnected society to all of America.”
According to DataReportal, 5.19 billion people worldwide were using the internet at the start of third quarter 2023, which accounts for 64.5% of the world’s total population. Internet users are also increasing, with the most recent data indicating that the world’s connected population increased by more than 100 million people in the year leading up to July 2023.
Furthermore, the global broadband internet services market is expected to grow to $898.71 billion in 2031 at a CAGR of 8.8%.
Investors’ interest in internet stocks is evident from the First Trust Dow Jones Internet Index Fund’s (FDN) 21.9% returns over the past six months.
With these favorable trends in mind, let’s delve into the fundamentals of the three Internet - Services stocks, beginning with number 3.
Stock #3: Liberty TripAdvisor Holdings, Inc. (LTRPA)
LTRPA operates as a travel guidance platform that connects people and audiences with travel partners. The company operates through three segments: Tripadvisor Core; Viator; and TheFork. Its travel platform provides online reservations and related services for destinations, accommodations, travel activities and experiences, and restaurants.
LTRPA’s trailing-12-month EV/Sales of 1.59x is 13.7% lower than the industry average of 1.85x. Its trailing-12-month Price/Sales of 0.02x is 97.9% lower than the industry average of 1.14x.
LTRPA’s trailing-12-month gross profit margin of 77.53% is 57.1% higher than the industry average of 49.37%. Its trailing-12-month levered FCF margin of 17.39x is 104.6% higher than the industry average of 8.50x.
During the first quarter that ended on June 30, 2023, LTRPA’s total revenue increased 18.5% year-over-year to $494 million. Also, its total current assets came in at $1.51 billion for the period that ended June 30, 2023, compared to $1.30 billion for the period that ended December 31, 2022. Its total assets came in at $4.79 billion, compared to $4.64 billion for the same period.
LTRPA’s shares have lost 10% over the past month to close the last trading session at $0.54.
LTRPA’s POWR Ratings reflect its fundamentals. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LTRPA also has a B grade for Value and Sentiment. It is ranked #11 out of 30 stocks in the Internet - Services industry. Click here for the additional POWR Ratings for Growth, Stability, Quality, and Momentum for LTRPA.
Stock #2: Vitru Limited (VTRU)
Headquartered in Florianópolis, Brazil, VTRU together with its subsidiaries, operates as a distance learning education company in Brazil. The company is divided into three divisions: Digital Education Undergraduate Courses; Continuing Education Courses; and On-Campus Undergraduate Courses.
VTRU’s forward non-GAAP P/E multiple of 12.69 is 11.2% lower than the industry average of 14.29. Its forward EV/EBIT multiple of 9.47% is 27.9% lower than the industry average of 13.13.
VTRU’s trailing-12-month EBITDA margin of 29.52% is 170.1% higher than the industry average of 10.93%, while its trailing-12-month net income margin of 10.67% is 142.8% higher than the industry average of 4.40%.
For the fiscal second quarter ended June 30, 2023, VTRU’s net sales increased 69.3% year-over-year to R$521.50 million ($107.12 million). The company’s adjusted EBITDA increased 73% year-over-year to R$202.40 million ($41.57 billion). Also, its adjusted net income increased 94.6% year-over-year to R$123.40 million ($25.35 million).
Street expects VTRU’s revenue to increase 13.5% year-over-year to $454.63 million for the year ending December 2024. Its EPS is expected to grow 63.3% year-over-year to $2.12 for the same period. It has surpassed EPS estimates in all of the four trailing quarters. Shares of VTRU has gained 7.1% over the past three months to close the last trading session at $16.46.
VTRU is ranked #8 in the same industry. It has an A grade for Sentiment and a B grade for Growth. To see additional VTRU’s ratings for Value, Stability, Quality and Momentum, click here.
Stock #1: 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.
SMWB’s forward Price/Sales multiple of 1.89 is 28.5% lower than the industry average of 2.64. Its forward EV/Sales multiple of 1.87% is 30.9% lower than the industry average of 2.71.
SMWB’s trailing-12-month gross profit margin of 75.12% is 54.4% higher than the industry average of 48.66%. Its trailing-12-month asset turnover ratio of 0.86x is 38.4% higher than the industry average of 0.62x.
In the fiscal second quarter that ended June 30, 2023, SMWB’s revenues increased 12.8% year-over-year to $53.68 million. The company’s gross profit improved 22.4% from the year-ago values to $41.11 million.
Also, its total current liabilities came in at $175.55 million for the period that ended June 30, 2023, compared to $180.93 million for the period that ended December 31, 2022. Its total liabilities came in at $213.75 million, compared to $224.09 million for the same period.
Analysts expect SMWB’s revenue to increase 12.2% year-over-year to $216.76 million for the year ending December 2023. Its EPS is expected to grow 78.3% for the same period. The stock has lost 14.4% over the past month to close the last trading session at $5.36.
SMWB has an A grade for Sentiment. It is ranked #6 in the same industry.
Beyond what is stated above, we’ve also rated SMWB for Growth, Value Stability, Momentum and Momentum. Get all SMWB ratings here.
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VTRU shares were trading at $16.21 per share on Monday afternoon, down $0.25 (-1.52%). Year-to-date, VTRU has declined -27.96%, versus a 17.16% 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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