ContextLogic Inc. (WISH) seems to be grappling with operational hurdles, weak financial performance, macroeconomic uncertainties, and competitive pressures. Therefore, sound Internet stocks Tripadvisor, Inc. (TRIP), Solo Brands, Inc. (DTC), and Despegar.com, Corp. (DESP) could make better buys instead.
Let’s understand this in detail.
WISH, a prominent player in the mobile e-commerce sphere, faces ongoing challenges in its operational landscape, as evidenced by its second-quarter performance. The company grappled with both macroeconomic factors and intensified competitive pressures, resulting in a substantial 42% year-over-year decline in total revenues.
The adjusted EBITDA revealed a loss of $66 million, contrasting with a $58 million loss in the second quarter of 2022, while the net loss and net loss per share amounted to $80 million and $3.38, respectively. In the coming months, the company anticipates that macroeconomic uncertainties and heightened competitive pressures will likely endure.
On the flip side, in 2023, the internet, an indispensable cornerstone of the contemporary information society, linked billions of individuals across the globe. With 5.18 billion worldwide users, it connects approximately two-thirds of the global population to the World Wide Web.
Recent research data reveals that during the first quarter of 2023, individuals spent an average of 400 minutes per day on the internet, equivalent to six hours and 40 minutes. This marked a five-minute uptick from the preceding quarter and represented the highest online engagement observed in at least four consecutive quarters.
The relentless advance of digitization, coupled with the ubiquitous integration of smartphones, is propelling significant expansion in internet utilization. The advent of 5G technology is further expediting this swift evolution in the internet realm, delivering swifter speeds and augmented connectivity.
Concurrently, the deployment of fixed wireless access, cloud-based infrastructure, and the escalating embrace of Internet of Things (IoT) devices are fortifying the sector's prospects. As per ReportLinker, the global wireless internet services market is estimated to grow at a 7% CAGR, reaching $921.97 billion by 2027.
Considering the outlined factors, TRIP, DTC, and DESP may offer more favorable investment opportunities compared to WISH, capitalizing on the prevailing industry growth trajectories. To that end, let us dive into the fundamentals of these three Internet industry picks, beginning with number three.
Stock #3: Tripadvisor, Inc. (TRIP)
TRIP is an online travel company that leverages its brands, technology, and capabilities to connect with a global audience. It provides travel content and guidance and operates marketplaces for experiences, accommodations, restaurants, and more. The Company's segments include Tripadvisor Core; Viator; and TheFork.
On July 19, TRIP unveiled a significant upgrade to its core trip planning product, Trips, by introducing an innovative AI-powered travel itinerary generator. This new feature, currently in public beta, enables TRIP to provide its users with personalized travel itineraries, harnessing the advanced generative AI technology from OpenAI.
This move could enhance user engagement and satisfaction, potentially driving increased usage and bookings. Additionally, personalized itineraries can lead to higher conversion rates, ultimately boosting the company's revenue and profitability.
For the second quarter that ended June 30, 2023, TRIP’s total revenue increased 18.5% year-over-year to $494 million. The company also registered a non-GAAP net income and non-GAAP EPS of $49 million and $0.34 during the quarter.
In addition, as of June 30, 2023, the company’s cash and cash equivalents amounted to $1.14 billion, compared to $1.02 billion as of December 31, 2022. Also, its total assets amounted to $2.73 billion, compared to $2.57 billion as of December 31, 2022.
For the fiscal year ending December 2023, TRIP’s revenue is expected to increase 16.8% year-over-year to $1.74 billion. The company’s EPS for the current year is estimated to grow 37.5% from the previous year to $1.03. Moreover, the company topped the consensus revenue estimates in all four trailing quarters.
Shares of TRIP have gained 4.5% over the past month to close the last trading session at $16.15.
TRIP’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
TRIP has an A grade for Quality and a B for Value. It is ranked #10 in the 59-stock Internet industry.
In addition to the POWR Ratings I’ve just highlighted, you can see TRIP’s ratings for Growth, Momentum, Stability, and Sentiment here.
Stock #2: Solo Brands, Inc. (DTC)
DTC is a direct-to-consumer platform that operates via four outdoor lifestyle brands, Solo Stove, Oru Kayak (Oru), ISLE Paddle Boards (ISLE), and Chubbies apparel. These brands develop and market products directly to customers, primarily using e-commerce channels.
On May 11, DTC announced its acquisition of TerraFlame, a company dedicated to crafting inviting, clean-burning flame spaces. The strategic move harmonizes with DTC's brand portfolio, particularly Solo Stove, enriching the company's ability to provide customers with exceptional outdoor fire experiences.
In addition, the acquisition holds the potential for increased product diversity and market share, thus bolstering revenue streams and overall profitability for DTC.
For the second quarter that ended June 30, 2023, DTC’s income from operations stood at $11.07 million, compared to a loss of $19.94 million in the prior year’s quarter. Its adjusted EBITDA rose 5.6% year-over-year to $24.99 million.
Also, the company’s adjusted net income came in at $17.88 million, up 3% from the year-ago value, while income per class A common stock amounted to $0.12, compared to a loss per share of $0.19 in the previous year’s period.
DTC's emphasis on achieving profitable growth, coupled with sustained wholesale momentum, resulted in robust revenue performance and a notable upswing in adjusted EBITDA margin in its fiscal second quarter.
Consequently, the company has announced an upward revision of its adjusted EBITDA margin target for the full year, now ranging from 17% to 18%, up from the previous 16.5% to 17.5%. This reflects the company's confidence in its financial strength and operational efficiency.
For the fiscal year December 2024, analysts expect DTC’s revenue to increase 12.7% year-over-year to $598.85 million. The company’s EPS for the same period is expected to grow 21.5% from the prior year to $1.18. Also, the stock surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has gained 21.1% year-to-date, closing the last trading session at $4.48.
DTC’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
DTC has a B grade for Growth, Value, Sentiment, and Quality. It is ranked #8 out of 59 stocks within the Internet industry.
Click here to access the additional DTC rating (Momentum and Stability).
Stock #1: Despegar.com, Corp. (DESP)
Headquartered in Buenos Aires, Argentina, DESP serves both leisure and corporate travelers by offering a diverse array of travel and travel-related products through its websites and mobile applications. The company operates in two segments, Travel Business and Financial Services Business.
DESP, in its fiscal second-quarter update, reaffirmed its focus on bolstering technological capabilities. It's set to unveil an AI trip planner in the third quarter, offering tailored travel suggestions and conversational trip planning enhancements, showcasing the company's commitment to advanced technology for a superior customer experience.
In addition, DESP will inaugurate ten predominantly asset-light stores in Brazil and 5 in Argentina by year-end. The new establishments would extend the company's reach into Latin America's significant cash-based economy and also cater to the preferences of over half of the region's travel consumers for personalized experiences.
For the second quarter that ended June 30, DESP’s total revenue increased 23.1% year-over-year to $165.50 million. Its total adjusted EBITDA grew 183% from the year-ago value to $30 million. Moreover, the company’s net income and EPS stood at $28 million and $0.25, compared to a loss and loss per share of $13.2 million and $0.26 in the previous year’s period.
The consensus revenue estimate of $764.41 million for the fiscal year ending December 2024 indicates a 13.4% year-over-year improvement. Likewise, the consensus EPS estimate of $0.58 exhibits a 222.2% rise from the previous year. The stock has gained 45.3% year-to-date, closing the last trading session at $7.28.
DESP’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
DESP has an A grade for Sentiment and a B for Value and Quality. It is ranked #3 within the same industry.
Click here to access additional DESP ratings for Growth, Momentum, and Stability.
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TRIP shares were trading at $15.90 per share on Thursday afternoon, down $0.25 (-1.55%). Year-to-date, TRIP has declined -11.57%, versus a 14.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
ContextLogic (WISH) Faces Stiff Competition: 3 Internet Stock Standouts StockNews.com
