By breaking down physical barriers, consumer internet businesses are reshaping how people shop, connect, learn, and play. This influence cuts both ways though because they have high exposure to the ups and downs of consumer spending, and the market seems to believe the tide is turning in the wrong direction - over the past six months, the industry has tumbled by 13.7%. This performance is a noticeable divergence from the S&P 500’s 10% return.
A cautious approach is imperative when dabbling in this space as competition is fierce and not all companies are created equal. Taking that into account, here are three internet stocks that may face trouble.
Fiverr (FVRR)
Market Cap: $398.7 million
Based in Tel Aviv, Fiverr (NYSE: FVRR) operates a fixed price global freelance marketplace for digital services.
Why Are We Hesitant About FVRR?
- Intense competition is diverting traffic from its platform as its active buyers fell by 12.3% annually
- Forecasted revenue decline of 7.2% for the upcoming 12 months implies demand will fall off a cliff
- Excessive marketing spend signals little organic demand and traction for its platform
Fiverr is trading at $11.15 per share, or 1.2x forward price-to-gross profit. Check out our free in-depth research report to learn more about why FVRR doesn’t pass our bar.
Angi (ANGI)
Market Cap: $223.3 million
Created by IAC’s mergers of Angie’s List and HomeAdvisor, ANGI (NASDAQ: ANGI) operates the largest online marketplace for home services in the US.
Why Are We Cautious About ANGI?
- Service Requests have declined by 19.2% annually over the last two years, suggesting it may need to revamp its features or user experience to stay competitive
- Forecasted revenue decline of 4% for the upcoming 12 months implies demand will fall even further
- Highly competitive market means it’s on the never-ending treadmill of sales and marketing spend
At $5.34 per share, Angi trades at 4x forward EV/EBITDA. To fully understand why you should be careful with ANGI, check out our full research report (it’s free).
EverQuote (EVER)
Market Cap: $667.8 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 Do We Think Twice About EVER?
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
EverQuote’s stock price of $18.88 implies a valuation ratio of 0.9x forward price-to-gross profit. If you’re considering EVER for your portfolio, see our FREE research report to learn more.
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