With the growing integration of digital technology into all business areas, internet penetration is expected to surge significantly in the upcoming years. Hence, quality internet service stocks Shutterstock, Inc. (SSTK), Perion Network Ltd. (PERI), and Liberty TripAdvisor Holdings, Inc. (LTRPA) could be worthwhile additions to your portfolio. Let’s understand this in detail.
The increased demand for virtual communication, remote work tools, e-commerce, and streaming services created unprecedented opportunities, propelling the internet services industry’s rapid expansion.
As of April 2023, there were 5.18 billion global internet users, equating to 64.6% of the world’s population. Its undeniable significance lies in enabling the expansive exchange of information and ideas while connecting individuals worldwide in a remarkable display of innovation.
Furthermore, the industry’s growth is being bolstered by the increasing implementation of 5G technology, which provides faster speeds, improved connectivity, and enables innovative services such as the Internet of Things (IoT). The expansion of fixed wireless access is also strengthening the industry’s prospects.
According to a report by ReportLinker, the global wireless internet services market is estimated to reach $921.97 billion by 2027, growing at a 7% CAGR.
Investors’ interest in internet stocks is evident from the Dow Jones Internet Services Index’s 16.9% returns over the past six months. Given robust fundamentals and solid growth prospects, Internet stocks SSTK, PERI, and LTRPA could make wise additions to your portfolio.
Let’s take a closer look at the fundamentals of these stocks:
Shutterstock, Inc. (SSTK)
SSTK is a technology company that offers top-notch content and innovative workflow solutions. Its image services include photos, vectors, and illustrations. It also provides footage and music services featuring tracks and sound effects. The company caters to corporate professionals, media companies, and individual creators.
On May 23, SSTK announced its agreement to acquire GIPHY, Inc. from Meta Platforms, Inc. (META), thus gaining access to the world’s largest GIF library and search engine. This move allows SSTK to expand beyond professional marketing and advertising, reaching a wider audience. The acquisition might boost the company’s profitability and growth.
Also, on March 21, SSTK unveiled its partnership with NVIDIA Corporation (NVDA) to train custom 3D models for generating 3D assets from text prompts. By combining its 3D content with NVDA’s foundational models and leveraging its own marketing and distribution platforms, the company aims to seize a tremendous market opportunity.
The stock’s trailing-12-month gross profit margin of 61.73% is 24.1% higher than the 49.76% industry average. Likewise, its trailing-12-month EBITDA margin of 19.47% is 9.1% higher than the 17.85% industry average.
For the fiscal first quarter that ended March 31, 2023, SSTK’s revenue increased 8.1% year-over-year to $215.28 million. Its adjusted EBITDA grew 27.3% year-over-year to $69.76 million. Moreover, the company’s adjusted net income rose 26.8% from the year-ago value to $47.13 million, while its adjusted EPS grew 29% year-over-year to $1.29.
The consensus revenue estimate of $815.28 million for the fiscal year ending December 2023 reflects a 2.8% year-over-year improvement. Likewise, the consensus EPS estimate of $4.08 for the current year indicates a 5.5% rise year-over-year. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of SSTK gained 1.2% intraday to close the last trading session at $50.30.
SSTK’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
SSTK has a B grade for Growth, Value, and Quality. It has ranked #2 in the 29-stock Internet - Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see SSTK’s ratings for Sentiment, Momentum, and Stability here.
Perion Network Ltd. (PERI)
Headquartered in Holon, Israel, PERI provides a comprehensive digital advertising ecosystem. It empowers brands, agencies, and publishers to effectively identify and engage customers across various channels. The company operates in three key areas of digital advertising: ad search; social media; and display, video, or CTV.
Doron Gerstel, PERI’s CEO, expressed satisfaction with the company's first-quarter results, saying, “We continue to outperform the adtech industry despite the challenging macro environment, as reflected in our ongoing market share gains and increased efficiencies, which are made possible by our innovative technology. All of these collectively, are driving top-line growth and margin expansion”.
Furthermore, the company has raised its annual guidance for 2023 based on its current visibility and the reliability of its business model. PERI now anticipates revenues of $725-$745 million, up from the prior guidance of $720-$740 million. Also, adjusted EBITDA for the year is projected to reach $155+ million, surpassing the earlier guidance of $149-$153 million.
PERI’s trailing-12-month EBIT margin of 17.17% is 103.7% higher than the 8.43% industry average. Additionally, its trailing-12-month net income margin of 16.29% compares to the industry average of 2.65%.
PERI’s revenue increased 15.8% year-over-year to $145.15 million for the fiscal first quarter that ended March 31, 2023. Its adjusted EBITDA rose 38% from the year-ago value to $31.27 million.
Also, the company’s non-GAAP net income and non-GAAP EPS grew 44.2% and 36.4% from the prior-year period to $29.90 million and $0.60, respectively.
PERI’s revenue is expected to grow 14.5% year-over-year to $732.93 million for the fiscal year ending December 2023. The company’s EPS for the ongoing year is expected to grow 13.9% year-over-year to $2.35. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 48.7% over the past year to close the last trading session at $30.91.
PERI’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
PERI has a B grade for Value, Quality, and Sentiment. It is ranked #3 out of 29 socks within the Internet – Services industry.
Click here to access additional PERI ratings (Growth, Momentum, and Stability).
Liberty TripAdvisor Holdings, Inc. (LTRPA)
LTRPA operates a travel guidance platform that delivers content, travel products, and services. It also offers two-sided marketplaces for travelers to explore, create, and share genuine user-generated content. The company operates through three segments: Tripadvisor Core; Viator; and TheFork.
LTRPA’s trailing-12-month gross profit margin of 78.2% is 57.2% higher than the 49.76% industry average. Its trailing-12-month levered FCF margin of 24.30% is 230.6% higher than the 7.35% industry average. Also, the stock’s trailing-12-month cash from operations of $439 million compares to the industry average of $216.08 million.
For the fiscal first quarter that ended March 31, 2023, LTRPA’s net revenue increased 41.6% year-over-year to $371 million. Its adjusted OIBDA grew 20% from the prior year’s quarter to $30 million. In addition, the company’s cash inflow from operating activities rose 57.6% from the year-ago value to $134 million.
As of March 31, 2023, the company’s cash and cash equivalents stood at $1.16 billion, compared to $1.05 billion as of December 31, 2022.
The stock marginally gained intraday to close the last trading session at $0.63.
LTRPA’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
LTRPA has a B grade for Value, Sentiment, Momentum, and Quality. It has ranked #4 out of 29 stocks within the same industry.
Click here to access additional LTRPA ratings for Growth and Stability.
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SSTK shares were trading at $49.11 per share on Monday afternoon, down $1.19 (-2.37%). Year-to-date, SSTK has declined -5.97%, versus a 12.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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