Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. Luckily for them, the market seems to believe there is a long runway for growth as the industry has recorded a 3.7% gain over the past six months while the S&P 500 was stuck in neutral.

Nevertheless, investors should tread carefully as many internet companies pursue winner-take-all strategies, meaning losses can be hefty if their playbooks don’t pan out. With that said, here is one internet stock boasting a durable advantage and two we’re steering clear of.

Two Consumer InternetStocks to Sell:

Cars.com (CARS)

Market Cap: $703.7 million

Originally started as a joint venture between several media companies including The Washington Post and The New York Times, Cars.com (NYSE: CARS) is a digital marketplace that connects new and used car buyers and sellers.

Why Is CARS Not Exciting?

1. Market opportunities are plateauing as its dealer customers were flat over the last two years
2. Estimated sales growth of 1.5% for the next 12 months implies demand will slow from its three-year trend
3. Earnings per share lagged its peers over the last three years as they only grew by 1.9% annually

At $11.37 per share, Cars.com trades at 3.3x forward EV/EBITDA. If you’re considering CARS for your portfolio, see our FREE research report to learn more.

eHealth (EHTH)

Market Cap: $121.3 million

Aiming to address a high-stakes and often confusing decision, eHealth (NASDAQ: EHTH) guides consumers through health insurance enrollment and related topics.

Why Do We Think Twice About EHTH?

1. Intense competition is diverting traffic from its platform as its estimated membership fell by 1.8% annually
2. Estimated sales decline of 3.4% for the next 12 months implies a challenging demand environment
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

eHealth’s stock price of $4.03 implies a valuation ratio of 2.6x forward EV/EBITDA. Read our free research report to see why you should think twice about including EHTH in your portfolio.

One Consumer Internet Stock to Buy:

Remitly (RELY)

Market Cap: $4.10 billion

With Amazon founder Jeff Bezos as an early investor, Remitly (NASDAQ: RELY) is an online platform that enables consumers to safely and quickly send money globally.

Why Is RELY a Good Business?

1. Active Customers have grown by 37.3% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
2. Incremental sales over the last three years have been highly profitable as its earnings per share increased by 74% annually, topping its revenue gains
3. Free cash flow margin grew by 35.6 percentage points over the last few years, giving the company more chips to play with

Remitly is trading at $20 per share, or 20.3x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

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