The internet industry is expected to thrive as a result of rising demand, digitalization, and government initiatives. Therefore, it could be wise to own fundamentally strong internet stocks Chegg, Inc. (CHGG), Match Group, Inc. (MTCH) and Meta Platforms, Inc. (META).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the internet industry.
According to Statista, the number of internet users worldwide was 5.30 billion in 2023, accounting for almost two-thirds of the global population. This indicates a significant increase in internet penetration and highlights the growing importance of digital connectivity in our modern society.
The broadband internet services market will be worth $500.57 billion by 2028, with a CAGR of 4%. The global increase in wireless users is driven by digital transformation and rising online learning uptake in enterprises requiring continuous broadband connectivity.
The social media market will reach $413.16 billion in 2028, with a CAGR of 13.2%. E-commerce integration, AR/VR, privacy measures, short-form video domination, influencer marketing, social commerce, audio-based platforms, and greater privacy all contribute to growth.
Investors’ interest in internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 39% gains over the past nine months.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Internet stocks, starting with number three.
Stock #3: 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 levered FCF margin of 23.81% is 320.8% higher than the industry average of 5.66%. Its trailing-12-month gross profit margin of 68.46% is 92.2% higher than the industry average of 35.61%.
CHGG’s revenue amounted to $187.99 million for the fiscal fourth quarter ended on December 31, 2023, while gross profit came in at $142.83 million. Its net income came in at $9.67 million, improving 420.2% from year-ago value.
For the fiscal fourth quarter that ended on December 31, 2023, CHGG’s net income per share came in at $0.09, up 800% year-over-year. Its EBITDA amounted to $66.17 million.
Analysts expect CHGG’s revenue to come in at $686.6 billion for the year ending December 2024. Its EPS is expected to grow marginally year-over-year to $1.11 for the same period. The stock has gained marginally over the past three months to close the last trading session at $9.05.
CHGG’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.
CHGG has a B grade for Growth, Value and Quality. Within the Internet industry, it is ranked #11 out of 52 stocks. To see additional POWR Ratings for Stability, Momentum and Sentiment for CHGG, click 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.
MTCH’s trailing-12-month EBIT margin of 27.25% is 224.2% higher than the 8.41% industry average. Its trailing-12-month EBITDA margin of 30.51% is 57.4% higher than the 19.38% 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 value 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.
The consensus revenue came in at $3.61 billion for the fiscal year ending December 2024 represents a 7.2% increase year-over-year. Its EPS is expected to grow 2.1% year-over-year to $3.09 for the same period. It is expected to surpass EPS in all four trailing quarters. MTCH’s shares have gained 18.1% past three months to close the last trading session at $36.35.
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 #10 in the same industry.
Beyond what is stated above, we’ve also rated MTCH for Growth, Stability, Momentum and Quality. Get all MTCH ratings here.
Stock #1: Meta Platforms, Inc. (META)
META engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments, Family of Apps and Reality Labs.
META’s trailing-12-month ROTA of 17.03% is significantly higher than the industry average of 1.50%. Its trailing-12-month ROCE of 28.04% is 605.8% higher than the industry average of 3.97%.
META’s revenue for the fourth quarter ended December 31, 2023, increased 24.7% year-over-year to $40.11 billion. The company’s income from operations increased 156% year-over-year to $16.38 billion. Its net income rose 201.3% year-over-year to $14.02 billion. Also, its EPS came in at $5.33, representing an increase of 202.8% year-over-year.
Street expects META’s revenue to come in at $158.39 billion for the year ending December 2024, up 17.4% year-over-year. Its EPS is expected to grow 34.1% year-over-year to $19.94 for the same period. It is expected to surpass EPS in all four trailing quarters. Shares of META have gained 163.7% over the past to close the last trading session at $473.28.
META has an overall B rating, equating to a Buy in our POWR Ratings system.
META’s is ranked #9 in the same industry. It has an A grade for Sentiment and Quality. To see additional META’s ratings for Growth, Stability, Value and Momentum, click here.
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META shares were trading at $485.81 per share on Thursday afternoon, up $12.53 (+2.65%). Year-to-date, META has gained 37.25%, versus a 5.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
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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