Despite macroeconomic uncertainties, due to its integral role in modern life, accelerated digitalization, and smart infrastructure expansion are creating a fertile ground for growth in the internet sector. Also, the global adoption of digital technologies and internet usage further supports the industry's success.
In this piece, I have evaluated whether it is worth investing in internet stocks Amazon.com, Inc. (AMZN) and Meta Platforms, Inc. (META).
Before diving deeper into the fundamentals of these stocks, let’s discuss why the entertainment industry is well-positioned for growth.
The pandemic accelerated the adoption of digital solutions for daily needs, driving a surge in internet usage. This led to growth in internet-based services like social media, e-commerce, online learning, and remote work tools, creating opportunities for internet service providers worldwide.
According to Statista, in 2023, there were 5.18 billion global internet users, encompassing roughly two-thirds of the world's population. The United States, a major online market, boasts over 90% internet access among Americans and hosts leading internet companies.
On top of it, the U.S. population share with internet access is projected to increase by 3.9 percentage points between 2024 and 2028, reaching a new peak of 97.6% in 2028.
Considering these conducive trends, let’s take a look at the fundamentals of the two above-mentioned Internet stocks.
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). The company's products offered through its stores include merchandise and content purchased for resale; and products offered by third-party sellers.
In terms of the trailing-12-month gross profit margin, AMZN’s 45.53% is 28.3% higher than the 35.50% industry average. Its 10.90% trailing-12-month Capex/Sales is 238.9% higher than the 3.22% industry average. However, the stock’s 3.29% trailing-12-month EBIT margin is 55.3% lower than the 7.36% industry average.
AMZN’s total net sales for the fiscal second quarter that ended on June 30, 2023, increased 10.8% year-over-year to $134.38 billion. The company’s net income came in at $6.75 billion, compared to a net loss of $2.03 billion in the year-ago quarter.
Likewise, its EPS came in at $0.65, compared to a loss per share of $0.20 in the same period last year. However, its total operating expenses rose 7.5% year-over-year to $126.70 billion.
For the quarter ended September 30, 2023, AMZN’s EPS and revenue are expected to increase 107.3% and 11.3% year-over-year to $0.58 and $141.48 billion, respectively. It surpassed the consensus EPS estimate in three of the trailing four quarters. Over the past month, the stock has declined 6.4% to close the last trading session at $131.47.
AMZN’s POWR Ratings reflect an uncertain outlook. It has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It has a C grade for Growth, Momentum, and Stability. It is ranked #15 out of 59 stocks in the Internet industry. To see AMZN’s Value, Sentiment, and Quality ratings, click 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.
In terms of the trailing-12-month EBIT margin, META’s 29.22% is 279% higher than the 7.71% industry average. Its 18.71% trailing-12-month net income margin is 442.2% higher than the 3.45% industry average. Likewise, the stock’s 26.12% trailing-12-month Capex/Sales is 552.7% higher than the 4% industry average.
META’s total revenue for the second quarter ended June 30, 2023, increased 11% year-over-year to $31.99 billion. Its income from operations rose 12.4% year-over-year to $9.39 billion. The company’s net income and EPS increased 16.5% and 21.1% year-over-year to $7.79 billion and $2.98, respectively.
META’s EPS and revenue for the quarter ended September 30, 2023, are expected to increase 119.7% and 20.7% year-over-year to $3.60 and $33.44 billion, respectively. The stock has gained 169.2% year-to-date to close the last trading session at $324.
META’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #8 in the Internet industry. It has an A grade for Quality and a B for Growth and Sentiment. Click here to see META’s Value, Momentum, and Stability ratings.
What To Do Next?
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AMZN shares were trading at $128.54 per share on Wednesday afternoon, down $2.93 (-2.23%). Year-to-date, AMZN has gained 53.02%, versus a 14.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
Analyzing Internet Stocks Meta Platforms (META) and Amazon.com (AMZN) for Long-Term Gains StockNews.com
