The Internet is pivotal as it is the foundation of digitalization initiatives, information, innovations, and immersive user experiences. With its proliferation and growing influence on transforming businesses, the Internet industry looks well-positioned for growth.
Amid this backdrop, fundamentally strong internet stocks Jamf Holding Corp. (JAMF), Expedia Group, Inc. (EXPE), Fiverr International Ltd. (FVRR), and trivago N.V. (TRVG) could be solid portfolio additions for bullish investors. Before diving deeper into their fundamentals, let’s discuss what’s happening in the internet industry.
There has been a significant rise in Internet penetration lately, with the growing usage of smartphones and the availability of cheap data plans. Statista revealed that the number of internet users in 2023 was 5.40 billion globally, representing 67% of the world’s population.
The Internet has transformed how businesses operate, providing a platform for travel, e-commerce, social commerce, telehealth services, digital marketing, video streaming, entertainment on the go, digital and financial services, etc. Businesses can now sell their products and services worldwide, reaching a global customer base.
Advancements in 5G and the adoption of advanced technologies like artificial intelligence (AI), blockchain, the Internet of Things (IoT), etc., are expected to boost the industry’s growth.
The integration of AI has been a game-changer for the internet industry. It has led to the development of digital experience platforms, fueling the demand and usage of interactive websites and mobile apps. These platforms offer customers personalized apps, enhancing their experience and streamlining expenses by managing various digital channels.
The global internet services market is projected to grow at a 4.4% CAGR, reaching $733.79 billion by 2031. Moreover, investors’ interest in Internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 37.1% returns over the past year.
With these favorable trends in mind, let's delve into the fundamentals of the four B-rated Internet stock picks, beginning with the fourth choice.
Stock #4: Jamf Holding Corp. (JAMF)
JAMF offers a cloud software platform for Apple infrastructure and security platform in the Americas, Europe, the Middle East, India, and Africa.
On March 7, JAMF and FTI Consulting, Inc., a global business advisory firm, announced a strategic relationship to help organizations improve incident response capabilities regarding mobile device threats worldwide.
Through the alliance, FTI Consulting strengthened its cybersecurity offering with JAMF’s unique and market-leading security product, Jamf Executive Threat Protection. This mobile endpoint security and threat defense platform proactively manages cyber risks and detects the most sophisticated threats facing mobile devices, showing a growing interest in JAMF’s products.
JAMF’s trailing-12-month gross profit margin and levered FCF margin of 80% and 23.98% are 64.5% and 147.9% higher than the industry averages of 48.64% and 9.67%, respectively.
JAMF’s total revenue and non-GAAP gross profit for the fiscal fourth quarter that ended December 31, 2023, increased 15.6% and 16% year-over-year to $150.65 million and $124.11 million, respectively. Its non-GAAP net income and net income per share stood at $18.12 million and $0.13, up 131.6% and 116.7% from the prior-year quarter, respectively.
Street expects JAMF’s revenue and EPS for the quarter that ended March 31, 2024, to increase 12.9% and 132.1% year-over-year to $149.24 million and $0.12, respectively. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 27.6% over the past six months to close the last trading session at $19.60.
JAMF’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a B grade for Growth and Sentiment. It is ranked #19 out of 53 stocks in the B-rated Internet industry. Click here to see the additional POWR Ratings for JAMF (Value, Momentum, Stability, and Quality).
Stock #3: Expedia Group, Inc. (EXPE)
EXPE operates as an online travel company in the U.S. and internationally. The company operates through B2C, B2B, and trivago segments.
On April 19, EXPE announced the launch of two new programs - Destination Climate Champions and the Destination Giveback Initiative- designed to support destination marketing and management organizations in becoming better environmental stewards and ensuring travel is a reasonable force in their local communities.
The new programs align with EXPE’s Open World social impact and sustainability strategy and its commitment to building resilient prosperity for destinations worldwide.
EXPE’s trailing-12-month CAPEX / Sales of 6.59% is 116.9% higher than the industry average of 3.04%. Its trailing-12-month Return on Common Equity and Return on Total Capital of 41.76% and 9.27% are 267.9% and 53.8% higher than the industry averages of 11.35% and 6.03%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, EXPE’s revenue increased 10.3% year-over-year to $2.89 billion. Its operating income stood at $104 million. In addition, its adjusted EBITDA increased 18.5% from the year-ago quarter to $532 million.
For the same quarter, its adjusted net income attributable to EXPE and earnings per share attributable to EXPE stood at $242 million and $1.72, up 23.5% and 36.5% from the prior-year quarter, respectively.
Analysts expect EXPE’s revenue for the quarter that ended March 31, 2024, to increase 5.5% year-over-year to $2.81 billion. Its EPS for the quarter ending June 30, 2024, is expected to grow 22.8% year-over-year to $3.55.
The company surpassed the consensus revenue and EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 41%, closing the last trading session at $133.14.
EXPE’s robust prospects are reflected in its POWR Ratings. It has an overall B rating, equating to Buy in our proprietary rating system.
EXPE has an A grade for Quality and a B for Growth and Value. It is ranked #7 within the same industry. To see the additional ratings of EXPE for Momentum, Stability, and Sentiment, click here.
Stock #2: Fiverr International Ltd. (FVRR)
Headquartered in Tel Aviv, Israel, FVRR operates an online marketplace worldwide. Its platform enables sellers to sell their services and buyers to buy them.
FVRR’s trailing-12-month gross profit margin and levered FCF margin of 82.89% and 16.51% are 171.8% and 156.4% higher than the industry averages of 30.50% and 6.44%, respectively.
FVRR’s revenue and non-GAAP gross profit for the fiscal fourth quarter that ended December 31, 2023, increased 10.1% and 12% year-over-year to $91.50 million and $77.37 million, respectively. For the same quarter, its non-GAAP net income and net income per share attributable to ordinary shareholders stood at $23.10 million and $0.56, up 115% and 115.4% from the prior-year quarter, respectively.
For the quarter that ended March 31, 2024, FVRR’s revenue and EPS are expected to increase 5.1% and 25.3% year-over-year to $92.47 million and $0.45, respectively. The company surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 1.6% to close the last trading session at $20.83.
FVRR’s POWR Ratings reflect its positive prospects. It has an overall B rating, equating to Buy in our proprietary rating system.
FVRR has an A grade for Growth and a B for Value and Quality. Within the Internet industry, it is ranked #6. Click here to see FVRR’s additional ratings for Momentum, Stability, and Sentiment.
Stock #1: trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates a hotel and accommodation search platform in the U.S., Germany, the United Kingdom, Canada, Japan, and internationally.
TRVG’s trailing-12-month Return on Total Capital of 5.73% is 69.1% higher than the industry average of 3.39%. Similarly, its trailing-12-month asset turnover ratio of 0.95x is 99.3% higher than the industry average of 0.48x.
For the fiscal first quarter that ended March 31, 2024, TRVG’s total revenue and cash, cash equivalents, and restricted cash at the end of the period stood at €101.43 million ($108.30 million) and €120.08 million ($128.22 million), respectively. In addition, its total other income increased 5.1% from the prior-year quarter to €841 thousand ($897.97 thousand).
As of March 31, 2024, TRVG’s accounts receivable amounted to €25.84 million ($27.59 million), compared to €19.09 million ($20.39 million) as of December 31, 2023.
Street expects TRVG’s revenue for the quarter ending September 30, 2024, to increase 6.2% year-over-year to $177.09 million. The stock has gained 2.9% year-to-date to close the last trading session at $2.51.
TRVG’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to Buy in our proprietary rating system.
TRVG has an A grade for Quality and a B for Value and Sentiment. Within the Internet industry, it is ranked #5. To see TRVG’s Growth, Momentum, and Stability ratings, click here.
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EXPE shares rose $1.41 (+1.06%) in premarket trading Thursday. Year-to-date, EXPE has declined -11.36%, versus a 6.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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