According to the International Telecommunication Union, 67% of the global population was connected to the Internet as of last year. With society’s growing dependence on digital technologies for both daily activities and business functions, the internet industry is set to sustain its upward trajectory.
With that in mind, I think quality Internet stocks Coupang, Inc. (CPNG), Match Group, Inc. (MTCH), and Chegg, Inc. (CHGG) could be well positioned for market success by leveraging key trends in the digital landscape.
Improved computer accessibility, global modernization efforts, and the widespread adoption of smartphones have facilitated greater and more convenient internet usage among individuals worldwide.
Last year, the global internet user count soared to 5.40 billion, a significant increase from the previous year’s 5.30 billion. As internet penetration continues to increase globally, a larger population gains access to online platforms, driving demand for various internet services.
The global internet service market is projected to reach $733.79 billion by 2031, expanding at a CAGR of 4.4%.
Additionally, social media’s rise has substantially enhanced online marketing, offering businesses direct access to their target audiences. Besides, the surge is propelled by heightened social media adoption, increased platform engagement post-pandemic, and the convenience of online purchasing.
This trend is underscored by the forecasted expansion of the global social commerce market at a remarkable CAGR of 31.6% from 2023 to 2030.
Further, over the past years, the ascent of online learning platforms has been nothing short of remarkable, reshaping the landscape of education. Empowered by technological advancements and the ubiquity of high-speed internet, these platforms have democratized learning, providing flexible and accessible education to learners globally.
As a result, revenue in the online education market is projected to reach $185.20 billion in 2024. Revenue is expected to rise at a CAGR of 8.6%, resulting in a projected market volume of $279.30 billion by 2029.
With these promising trends in mind, let’s delve into the potential of the three top-performing Internet stocks, starting with the third most promising.
Stock #3: Coupang, Inc. (CPNG)
CPNG owns and operates a retail business through its mobile applications and Internet websites, mainly in South Korea. The company operates through the Product Commerce and Developing Offerings segments. It sells products and services in the categories of home goods, apparel, beauty products, groceries, sporting goods, electronics, and more.
On March 5, CPNG reaffirmed its Strategic Partnership with the U.S. Department of Commerce and International Trade Administration (ITA). Together, they intend to host two interactive webinars aimed at educating U.S. entrepreneurs and sellers about cross-border trade opportunities in Korea, with a particular emphasis on empowering women-owned businesses.
On January 31, 2024, CPNG announced that it had completed the acquisition of the assets of global online luxury company Farfetch Holdings plc. This strategic acquisition provides access to $500 million in capital and allows Farfetch to continue delivering exceptional services for its brand and boutique partners and more than four million customers globally.
CPNG’s trailing-12-month asset turnover ratio of 2.13x is 113.6% higher than the industry average of 1x. Also, the stock’s trailing-12-month ROCE and ROTA of 41.83% and 10.19% are 263.5% and 140.8% higher than the industry averages of 11.51% and 4.23%, respectively.
During the fiscal fourth quarter that ended December 31, 2023, CPNG’s total net revenues increased 23% year-over-year to $6.56 billion. Its adjusted EBITDA rose 39% from the prior year’s quarter to $294 million. The company’s adjusted net income and EPS grew 121% and 167% year-over-year to $137 million and $0.08, respectively.
CPNG’s revenue for the first quarter (ended March 2024) is expected to rise 18.6% year-over-year to $6.88 billion. Its EPS for the same quarter is projected to grow 26.1% from the prior-year quarter to $0.06. Moreover, the company has surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.
The stock has soared 15.9% over the past three months to close the last trading session at $18.23.
CPNG’s POWR Ratings reflect its rosy 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 Momentum. It is ranked #18 in the 53-stock Internet industry. The industry is B-rated.
In addition to the POWR Ratings stated above, one access CPNG’s Quality, Value, Growth, Stability, and Sentiment ratings here.
Stock #2: Match Group, Inc. (MTCH)
MTCH provides dating products worldwide. The company’s portfolio of brands includes Tinder, Match, Meetic, OkCupid, Hinge, Pairs, PlentyOfFish, OurTime, and various other brands.
On February 21, MTCH entered into a partnership with OpenAI, introducing over 1,000 ChatGPT Enterprise licenses to enhance workplace dynamics. This collaboration aims to revolutionize communication, coding, design, and analysis and streamline daily office tasks. The partnership emphasizes the responsible use of AI tools, prioritizing privacy and security measures to ensure safe implementation within the company’s operations.
MTCH’s trailing-12-month EBIT margin of 27.25% is 229.2% higher than the 8.28% industry average. Its trailing-12-month net income margin of 19.37% is 607.3% higher than the 2.74% industry average.
MTCH’s total revenue for the fiscal fourth quarter (ended December 31, 2023) increased 10.2% year-over-year to $866.23 million, while its operating income rose 144.1% from the year-ago quarter to $260.25 million. Moreover, the company’s attributable net earnings amounted to $229.66 million and $0.81 per share, up 171.5% and 170% from the prior-year quarter, respectively.
Street projects MTCH’s EPS and revenue to rise 13.5% and 8.8% year-over-year to $0.61 and $856.50 million in the fiscal first quarter ended March 2024. It has also exceeded the consensus revenue estimates in three of the trailing four quarters.
MTCH’s shares declined 1.9% intraday to close the last trading session at $35.22.
It’s no surprise that MTCH has an overall B rating, equating to a Buy in our POWR Ratings system.
It has a B grade for Value and Quality. It is ranked #16 in the same industry.
Beyond what is stated above, we’ve also rated MTCH for Growth, Momentum, Stability, and Quality. Get all MTCH ratings here.
Stock #1: Chegg, Inc. (CHGG)
CHGG operates a direct-to-student learning platform, offering subscription services such as Chegg Study and Chegg Writing, as well as skills-based courses, language learning, and textbook rentals/sales. Its comprehensive services support students from academics to career development.
CHGG’s trailing-12-month gross profit margin of 73.80% is 105.1% higher than the industry average of 35.98%. Its trailing-12-month levered FCF margin of 22.85% is 312.1% higher than the industry average of 5.55%.
During the fiscal fourth quarter that ended on December 31, 2023, CHGG’s revenue amounted to $187.99 million. Its income from operations rose 73.2% year-over-year to $13.29 million. Its net income came in at $9.67 million, improving 420.2% from the year-ago quarter, and net income per share came in at $0.09, up 800% year-over-year.
CHGG anticipates robust financial performance in the first quarter of 2024. Total net revenues are projected to range between $173 million and $175 million, driven primarily by strong subscription services revenues estimated to be between $155 million and $157 million. The company expects a healthy gross margin of 73% to 74%, indicating efficient cost management.
Analysts expect CHGG’s revenue to be $685.42 million for the year ending December 2024. Its EPS is expected to grow 2.4% year over year to $1.13 for the current year. Moreover, it has surpassed consensus revenue estimates in each of the trailing four quarters.
The stock fell 1.3% intraday to close the last trading session at $7.13.
CHGG’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
CHGG has an A grade for Value and a B for Growth and Quality. Within the same industry, it is ranked #14.
To see CHGG’s additional POWR Ratings for Stability, Momentum, and Sentiment, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CPNG shares were trading at $18.37 per share on Wednesday afternoon, up $0.14 (+0.77%). Year-to-date, CPNG has gained 13.47%, versus a 9.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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