Should Amazon.com (AMZN) and Dingdong (DDL) Secure a Spot in Your Portfolio?

The internet industry is expected to grow as a result of rapid digitalization, increased online platforms, and the adoption of emerging technologies such as AI and IoT, which are driving innovation and new digital opportunities. Against this backdrop, investing in fundamentally sound internet stocks Amazon.com, Inc. (AMZN) and Dingdong (Cayman) Limited (DDL) could be wise.

The Department of Commerce’s National Telecommunications and Information Administration (NTIA) announced that it has allocated 28 grants totaling $74.42 million to 28 Tribal entities as part of the Tribal Broadband Connectivity Program (TBCP).

With funding from the Bipartisan Infrastructure law, these new grants boost the program’s total award to 226 Tribal entities more than $1.86 billion. Record investments in high-speed Internet deployment is a crucial component of President Biden’s Investing in America agenda.

The global wireless internet services market is estimated to increase at a CAGR of 7% to $921.87 billion by 2027. Advances in 5G technology are likely to fuel market expansion further, as it offers higher speeds and lower latency, enabling seamless communication for diverse applications such as IoT and autonomous vehicles.

Furthermore, the e-commerce market is predicted to reach $16.24 trillion by 2028, increasing at a 15.8% CAGR. This expansion can be due to the increasing global adoption of smartphones and internet connectivity, which has considerably increased shopping via the internet. Also, the convenience and ease of use provided by e-commerce platforms have contributed to the market’s growth.

Investors’ interest in internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 18.9% gains over the past six months.

Considering these conducive trends, let’s look at the fundamentals of the Internet stock picks, beginning with number 2.

Stock #2: Amazon.com, Inc. (AMZN)

AMZN engages in the retail sale of consumer products and subscriptions through online and physical stores in North America and internationally. It operates through three segments: North America; International; and Amazon Web Services (AWS).

On November 16, 2023, AMZN and Hyundai Motor Company (HYMTF) launched a comprehensive strategic cooperation to provide customers with exciting new experiences. This strategic partnership includes Amazon introducing online Hyundai vehicle sales in the United States in 2024, Hyundai identifying AWS as its preferred cloud provider to aid in digital transformation, and the Alexa Built-in experience coming to Hyundai’s next-generation vehicles.

AMZN hopes to increase its position in the automobile business through this relationship by using Hyundai's renowned reputation and customer base.

AMZN’s trailing-12-month EBITDA margin of 13.35% is 21% higher than the 11.04% industry average. Its trailing-12-month levered FCF margin of 6.57% is 26.9% higher than the 5.18% industry average.

For the third quarter that ended September 30, 2023, AMZN’s net sales increased 12.6% year-over-year to $143.08 billion. Its operating income grew 343.1% from the year-ago value to $11.19 billion. The company’s net income rose 244% year-over-year to $9.88 billion. Furthermore, the company’s EPS came in at $0.94, an increase of 235.7% year-over-year.

Analysts expect AMZN’s revenue to increase 11.1% year-over-year to $570.78 billion for the year ending December 2023. Its EPS is expected to come in at $2.67 for the same period. It surpassed EPS estimates in three of four trailing quarters. Shares of AMZN have gained 56.9% over the past nine months to close the last trading session at $146.74.

AMZN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

AMZN also has an A grade for Sentiment and a B for Growth, Momentum and Quality. It is ranked #17 out of 57 stocks in the Internet industry. Click here for the additional POWR Ratings for Value and Stability for AMZN.

Stock #1: Dingdong (Cayman) Limited (DDL)

Based in Shanghai, China, DDL is an e-commerce company that operates as an on-demand e-commerce company. The company offers vegetables, fresh produce, fruits, seafood products, meat, and eggs. It also provides ready-to-eat, ready-to-cook, and ready-to-heat products, as well as dairy and bakery products. DDL operates as a self-operated online retail business, primarily through Dingdong Fresh.

DDL’s trailing-12-month asset turnover ratio of 2.46x is 192.3% higher than the 0.84x industry average.

DDL’s total current liabilities came in at RMB 6.89billion ($970.08 million) for the period that ended September 30, 2023, compared to RMB8.21 billion ($1.16 billion) for the period that ended December 31, 2022. Also, its total liabilities came in at RMB7.52 billion ($1.06 billion), compared to RMB8.96 billion ($1.26 billion) for the same period.

The consensus revenue estimate of $3.09 billion for the year ending December 2024 represents a 9.8% increase year-over-year. Its EPS is expected to grow 334.4% year-over-year to $0.15 for the same period. It surpassed EPS estimates in three of four trailing quarters. Over the past month the stock has gained 17.8% to close the last trading session at $2.18.

DDL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It is ranked #16 in the same industry. It has a B grade for Value and Growth. To see additional DDL’s ratings for Sentiment, Momentum, Stability and Quality, click here.

What To Do Next?

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AMZN shares were trading at $147.95 per share on Monday morning, up $1.21 (+0.82%). Year-to-date, AMZN has gained 76.13%, versus a 20.16% rise in the benchmark S&P 500 index during the same period.

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.

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