The internet industry is growing considerably due to increasing internet usage worldwide and continuous technological innovation. With businesses, governments, and individuals embracing digital technologies for communication, commerce, entertainment, education, healthcare, and more, digital transformation fuels the demand for internet-based services.
Given these factors, it could be wise to invest in fundamentally sound internet stocks Angi Inc. (ANGI), Upwork Inc. (UPWK), and Similarweb Ltd. (SMWB), heading toward solid profits this month.
Among the largest online markets in the world, the U.S. ranks third with more than 311 million internet users nationwide. As a global hub of technological innovation and home to some of the world’s leading internet companies, the U.S. has increased its digital population for over two decades.
Besides, mobile internet usage has surged, with about 295 million users in 2023, driving more than 45% of web traffic, while social media usage is projected to exceed 342 million users by 2029, with Facebook leading in market share.
Moreover, technological advances, including the development of faster internet connections like broadband and mobile internet (3G, 4G, and now 5G), have made it easier for people to access high-speed internet from several devices like smartphones and computers. The global 5G services market is estimated to hit $664.75 billion by 2028, exhibiting a CAGR of 26.9%.
Notably, increased internet penetration and rapid digitalization have led to a significant surge in online activities, including remote work, e-learning and online education, telehealth, video streaming, digital banking, and online shopping. This has further created vast opportunities for companies that offer internet-based services and solutions.
The e-commerce market is expected to total $18.81 trillion by 2029, growing at a CAGR of 15.8% during the forecast period (2024-2029). Meanwhile, according to an analysis by iBe, online marketplaces are projected to exceed $7 trillion in sales by 2024.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best internet stocks: ANGI, UPWK, and SMWB.
Angi Inc. (ANGI)
ANGI provides consumers with tools and resources that match them with independently established home service professionals in the U.S. and internationally. The company operates through three segments: Ads and Leads; Services; and International.
ANGI’s trailing-12-month gross profit margin of 95.43% is 93.2% higher than the industry average of 49.39%. Also, the stock’s trailing-12-month asset turnover ratio of 0.72x is 50.5% higher than the industry average of 0.48x.
The stock’s forward EV/Sales of 1.12x is 40.6% lower than the industry average of 1.88x. Likewise, its forward Price/Sales multiple of 0.96 is 23.3% lower than the industry average of 1.25.
For the fourth quarter that ended December 31, 2023, ANGI reported revenue of $300.43 million, and its gross profit stood at $283.19 million. The company’s operating income came in at $7.63 million, compared to an operating loss of $28.20 million in the previous-year quarter.
Furthermore, as of December 31, 2023, the company’s cash and cash equivalents stood at $364.04 million, compared to $321.16 million as of December 31, 2022.
Analysts expect ANGI’s revenue for the fiscal year (ending December 2025) to increase 6% year-over-year to $1.32 billion. Street expects the company to report an EPS of $0.06 for the same year. Moreover, ANGI has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
ANGI’s stock has soared 21.2% over the past six months to close the last trading session at $2.29.
ANGI’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value and Sentiment. It is ranked #12 in the 53-stock B-rated Internet industry.
Beyond what is stated above, we’ve also rated ANGI for Quality, Growth, Stability, and Momentum. Get all ANGI ratings here.
Upwork Inc. (UPWK)
UPWK operates a work marketplace that connects businesses with various independent professionals and agencies in the U.S., India, the Philippines, and internationally. The company’s marketplace offerings include Upwork Payroll and Upwork Enterprise, alongside managed and escrow services.
On December 5, 2023, UPWK announced its first of many partnerships with vendor management systems (VMS) and managed service providers (MSP) for its Enterprise Suite offering. SAP Fieldglass and Flextrack partnered with UPWK to deliver a more comprehensive and unified approach to workforce management.
In addition, Upwork has been developing a range of integrations and accessible APIs to enhance the functionality of the Upwork Enterprise Suite across an enterprise’s entire workforce ecosystem. These partnerships and integrations will allow Upwork enterprise customers to drive efficiency, scale, and optimize their workforces.
UPWK’s trailing-12-month gross profit margin of 75.27% is 145% higher than the industry average of 30.72%. Also, the stock’s trailing-12-month net income margin of 6.80% is 15% higher than the industry average of 5.91%. Its trailing-12-month ROCE of 14.89% is 24.1% higher than the industry average of 12%.
During the fourth quarter that ended December 31, 2023, UPWK’s total revenue increased 13.9% year-over-year to $183.93 million. Its gross profit grew 14.8% year-over-year to $138.07 million. Also, its net income came in at $17.37 million, compared to a loss of $16.50 million in the previous year’s quarter.
In addition, UPWK’s net income per share came in at $0.13, compared to a loss per share of $0.13 in the same quarter of 2022.
Analysts expect UPWK’s revenue and EPS for the fiscal year (ended March 2024) to increase 12.2% and 52.7% year-over-year to $773.39 million and $0.79, respectively. Additionally, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is remarkable.
Moreover, for the fiscal year 2025, the company’s revenue and EPS are expected to grow 12.5% and 22.1% year-over-year to $870.13 million and $0.97, respectively.
Shares of UPWK have gained 30.7% over the past nine months to close the last trading session at $11.93.
UPWK’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
UPWK has a B grade for Growth. It is ranked #6 among 28 stocks in the Internet - Services industry.
In addition to the POWR Ratings highlighted above, one can access UPWK’s ratings for Value, Momentum, Sentiment, Quality, and Stability here.
Similarweb Ltd. (SMWB)
Headquartered in Givatayim, Israel, SMWB provides a platform for digital intelligence in the U.S., Europe, Asia Pacific, the United Kingdom, Israel, and internationally. It offers digital research intelligence solutions that allow senior leaders, strategy, business intelligence, and consumer insights teams to benchmark performance against competitors and market leaders.
On March 4, 2024, SMWB completed the acquisition of Admetricks, the creator of powerful ad intelligence software slated to form the core of the new Similarweb Ad Intelligence product. Admetricks will advance SMWB’s mission of providing the most comprehensive data, analytics, and optimization tools for digital marketing and advertising.
SMWB’s trailing-12-month gross profit margin of 78.40% is 62% higher than the industry average of 48.41%. Also, the stock’s trailing-12-month asset turnover ratio of 0.90x is 46.1% higher than the industry average of 0.62x.
SMWB’s forward EV/Sales of 2.78x is 2.3% lower than the 2.84x industry average. Likewise, the stock’s forward Price/Sales of 2.80x is 3.2% lower than the industry average of 2.89x.
In the fourth quarter that ended December 31, 2023, SMWB’s number of customers grew 16% year-over-year to 4,712. As a result, its revenue increased 10.5% year-over-year to $56.76 million. Its non-GAAP gross profit amounted to $46.19 million, up 14.5% from the year-ago quarter.
Further, the company reported a non-GAAP operating income of $4.75 million, compared to an operating loss of $10.90 million in the prior-year quarter.
Analysts expect SMWB’s revenue to increase 12.2% year-over-year to $244.69 million for the fiscal year ending December 2024. For the fiscal year 2025, the company’s revenue and EPS are anticipated to grow 14.2% and 97.6% from the prior year to $279.45 million and $0.18, respectively.
Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is remarkable.
Shares of SMWB have surged 61.9% over the past three months to close the last trading session at $8.74.
SMWB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
SMWB has an A grade for Sentiment and a B in Growth and Quality. It topped the list of 28 stocks in the Internet - Services industry.
Click here to access the additional SMWB ratings (Value, Stability, and Momentum).
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ANGI shares were unchanged in premarket trading Friday. Year-to-date, ANGI has declined -8.03%, versus a 8.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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