1 Internet Stock with Solid Fundamentals and 2 to Ignore

March 19, 2025 at 09:03 AM EDT

CHWY Cover Image

By breaking down physical barriers, consumer internet businesses are reshaping how people shop, connect, learn, and play. These themes have enabled rapid growth for the industry, which has posted a 4.1% gain over the past six months. This was a good place to be as the S&P 500 shed 1.6% of its value.

Although these companies have produced results, only those with the widest moats will survive as emerging red-hot players pop up regularly to take their slice of the pie. Taking that into account, here is one internet stock poised to generate sustainable market-beating returns and two we’re steering clear of.

Two Consumer Internet Stocks to Sell:

Chewy (CHWY)

Market Cap: $13.08 billion

Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE: CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.

Why Does CHWY Fall Short?

Estimated sales growth of 7.8% for the next 12 months implies demand will slow from its three-year trend
Gross margin of 28.6% reflects its high servicing costs
Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital

At $31.90 per share, Chewy trades at 21.6x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than CHWY.

EverQuote (EVER)

Market Cap: $945.3 million

Aiming to simplify a once complicated process, EverQuote (NASDAQ: EVER) is an online insurance marketplace where consumers can compare and purchase various types of insurance from different providers

Why Are We Cautious About EVER?

Muted 6.1% annual revenue growth over the last three years shows its demand lagged behind its consumer internet peers
Excessive marketing spend signals little organic demand and traction for its platform

EverQuote is trading at $27 per share, or 15.3x forward EV-to-EBITDA. To fully understand why you should be careful with EVER, check out our full research report (it’s free).

One Consumer Internet Stock to Watch:

Upwork (UPWK)

Market Cap: $1.79 billion

Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ: UPWK) is an online platform where businesses and independent professionals connect to get work done.

Why Do We Like UPWK?

Customer spending is rising as the company has focused on monetization over the last two years, leading to 8.4% annual growth in its average revenue per customer
Incremental sales over the last three years have been highly profitable as its earnings per share increased by 168% annually, topping its revenue gains
Free cash flow margin jumped by 21.1 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends

Upwork’s stock price of $13.25 implies a valuation ratio of 10x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.

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