The internet sector is one of the most dynamic and fastest-growing sectors in the global economy. Internet stocks offer the potential for high returns. Thus, stocks like Data Storage Corporation (DTST), Fiverr International Ltd. (FVRR), and Expedia Group, Inc. (EXPE) could be must-buys for this month and beyond. But before going into fundamentals, let’s take a look at the industry landscape.
With widespread dependency on e-commerce, the Internet of Things, Artificial Intelligence (AI), and the cloud for daily activities, the internet industry’s importance is stronger than ever. Moreover, with social media integrating into our lives, internet usage is growing tremendously.
In the changed post-COVID-19 business landscape, the global market for mobile internet, which was estimated at 5.60 billion subscribers in 2022, is projected to reach a revised size of 9.10 billion subscribers by 2030, growing at a CAGR of 6.4% between 2022 and 2030.
Digital transformation across various industries is spearheading the prospects for broadband services. The global broadband services market is expected to grow at a CAGR of 9.7% between 2023 and 2030.
According to analytics firm Demand Sage, there are more than 5.30 billion active internet users around the globe in 2023, corresponding to 65.4% of the global population. Since 2018, about 900,000 people have gone online for the first time every day. The increasing affordability of smartphones and mobile data drives this user growth.
Considering the above figures and forecasts, let’s dive into the Internet stock fundamentals to understand the investment opportunity better, starting with the third stock.
Stock #3: Data Storage Corporation (DTST)
DTST specializes in multi-cloud IT solutions. It provides services like data protection, disaster recovery, cybersecurity, and voice/data connectivity primarily to businesses across various industries, including healthcare, finance, manufacturing, education, and government sectors.
On July 27, DTST secured a multi-year subscription-based contract with a major U.S. food distributor to provide managed disaster-recovery solutions, enhancing its presence in the food industry and demonstrating its ability to offer critical enterprise resources. This reflects the potential for further growth in the industry.
In the same month, DTST won a multi-million project with a prominent sports and entertainment company to provide customized cloud storage infrastructure, enhancing file response time, recovery, and storage capacity crucial for their security.
This success highlights DTST's expertise in tailored solutions, data security, and its potential for further collaborations within the sports and entertainment industry.
DTST’s sales increased 22.3% year-over-year to $5.90 million, while gross profit increased 65.5% year-over-year to $2.58 million for the fiscal second quarter (ended on June 30, 2023).
Its income from operations and net income stood at $106.74 thousand and $206.04 thousand, respectively, registering significant increments from the prior year quarter. EPS also improved substantially year-over-year to $0.03,
Street expects DTST’s revenue to increase 13.1% year-over-year in the current quarter (ending September 2023) to $5 million. For the fiscal year 2023, its revenue is projected to reach $24.10 million, registering a marginal increase from the prior year. Additionally, it topped the revenue estimates in three of the trailing four quarters.
The stock has gained 114.2% year-to-date and 77.1% over the past six months to close the last trading session at $3.17.
DTST’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DTST also has an A grade for Sentiment and a B for Growth. It is ranked #12 out of 60 stocks in the Internet industry. Click here to see the other ratings of DTST for Value, Momentum, Stability, and Quality.
Stock #2: Fiverr International Ltd. (FVRR)
FVRR, headquartered in Tel Aviv, Israel, operates a global online marketplace where sellers offer a wide range of services spanning multiple categories to buyers. They also provide software solutions for freelancers, learning resources, and content marketing services, serving businesses of all sizes and a diverse group of freelancers and small businesses.
On August 1, FVRR introduced its new product line: a Business Solutions suite for mid and large-size businesses, an all-new Fiverr Pro, and the debut of its neural network-powered Fiverr Neo™ to match talent with customers.
On June 29, FVRR introduced Fiverr Certified, a program that collaborates with tech partners like Amazon Ads, monday.com, and Stripe to create a unique freelance marketplace. The new program and the product launches should add to the company’s revenues.
For the fiscal second quarter that ended June 30, 2023, FVRR’s revenue increased 5.1% year-over-year to $89.39 million, while its non-GAAP gross profit increased 7.1% year-over-year to $75.26 million.
The company’s non-GAAP net income and non-GAAP net income per share attributable to ordinary shareholders came in at $20.04 million and $0.49, representing improvements of 311.4% and 308.3%, respectively, from the prior-year quarter. Additionally, the adjusted EBITDA came in at $15.27 million, registering a 231.5% increase from prior-year value.
The consensus revenue estimate of $91.25 million for the third quarter (ending September 2023) represents a 10.6% increase year-over-year. The consensus EPS estimate of $0.46 for the current quarter indicates a 119.8% improvement year-over-year. The company has an impressive surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 8.6% over the past three months and 3.7% over the past five days to close the last trading session at $29.39.
FVRR’s robust prospects are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system.
FVRR also has an A grade for Growth and B for Quality. It is ranked #8 out of all stocks in the same industry. Click here to see the other ratings Of FVRR for Value, Momentum, Stability, and Sentiment.
Stock #1: Expedia Group, Inc. (EXPE)
EXPE is an online travel company with a diverse brand portfolio, offering a range of travel-related services and accommodations, operating through its Retail; B2B; and trivago segments. It also provides advertising and media services and caters to various distribution channels in the travel industry.
On July 25, EXPE partnered with Walmart Inc. (WMT) to offer a travel benefit for Walmart+ members, allowing them to earn Walmart Cash on various travel bookings through WalmartPlusTravel.com. This collaboration is expected to expand EXPE's reach while showcasing its technology and extensive travel supply network.
On July 17, EXPE announced a new loyalty program, One Key™, unifying the company's three flagship travel brands of Expedia®, Hotels.com®, and Vrbo®. The company could benefit from this venture by simplifying travel rewards for its customers.
For the fiscal second quarter ended on June 30, 2023, EXPE’s revenue increased 5.6% year-over-year to $3.36 billion. Operating income also increased 28.4% from the prior-year value to $443 million.
Adjusted net income attributable to EXPE and adjusted earnings per share attributable to EXPE stood at $428 million and $2.89, respectively, registering an increment of 38.1% and 47.4%, respectively, from the prior-year quarter.
For the fiscal third quarter (ending September 2023), analysts expect EXPE’s revenue to improve 6.8% year-over-year to $3.86 billion, while its EPS is estimated to increase 24.3% year-over-year to $5.03.
EXPE’s shares have gained 25.8% year-to-date and 6.8% over the past month, closing the last trading session at $110.22.
EXPE’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to Buy in our proprietary rating system. It has an A grade for Value and Quality and a B for Momentum.
Within the same industry, it is ranked #5. Click here to view EXPE’s ratings for Growth, Stability, and Sentiment.
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EXPE shares were trading at $107.25 per share on Wednesday afternoon, down $2.97 (-2.69%). Year-to-date, EXPE has gained 22.43%, versus a 17.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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