The Internet industry plays a vital role in connecting people and facilitating communication, enabling the seamless flow of information and services that define our digital age. So, I think investors could consider buying quality internet stocks Expedia Group Inc. (EXPE), Chegg, Inc. (CHGG), and trivago N.V. (TRVG) to strengthen their portfolio.
The Internet has granted individuals the incredible ability to seamlessly exchange information and engage in meaningful communication, and remain connected. The internet is a crucial tool for global communication, information, and entertainment, with over half the world's population connected to it.
The United States stands as a major epicenter of internet usage, boasting a staggering 307 million internet users within its borders. This digital phenomenon has enveloped over 90% of the American population, leaving no facet of daily existence untouched by its transformative influence.
In addition, the Internet of Things (IoT) is advancing, connecting objects and enabling data-driven tasks thanks to 5G, AI, and machine learning. IoT applications range from smartwatches to smart city infrastructure.
This year, the United States is expected to make the most money from the IoT market, with around $172.30 billion in revenue. Within the IoT, the automotive sector is predicted to be the biggest, making about $66.28 billion in the same year. Moreover, The US IoT market is anticipated to expand at a CAGR of 11.50% to reach $297 billion by 2028.
Furthermore, the introduction of 5G technology is set to revolutionize various industries, including agriculture and healthcare. In the United States, it's anticipated to contribute $1.50 trillion to the economy by 2025. California stands to gain the most, with a $253 billion boost and 2.39 million jobs, but New York and Texas will also experience significant benefits.
Considering these conducive trends, let’s look at the fundamentals of the three best Internet stocks, starting with number 3.
Stock #3: Expedia Group Inc. (EXPE)
EXPE is a global player in online travel, offering various travel services and places to stay through popular brands like Expedia, Hotels.com, Vrbo, and Trivago. It serves both vacationers and business travellers, with perks like loyalty programs and advertising services. It provides a wide range of travel options to all sorts of people and businesses.
On November 2, 2023, EXPE announced a $5 billion stock buyback plan in response to a significant increase in travel demand.
For the third quarter ended September 30, 2023, EXPE's revenue and adjusted net income amounted to $3.93 billion and $ 778 million, up 8.6% and 21.6% year-over-year, respectively.
Gross bookings were up 7.1% from the year-ago quarter to $25.69 billion. Its non-GAAP adjusted EBITDA grew 12.7% year-over-year to $1.22 billion. Also, adjusted EPS amounted to $2.87.
Analysts expect EXPE’s revenue and EPS to grow 9.4% and 31.3% year-over-year, up $2.86 billion and $1.65 for the fourth quarter ending December 2023.
Shares of EXPE have risen 28.6% over the past year and 24.5% over the past six months to close the last trading session at $112.71. Moreover, the stock rose 18.8% intraday.
EXPE’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, equating 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.
EXPE has an A grade for Value and Quality. Within the Internet industry, it is ranked #16 out of 58 stocks.
Click here for EXPE’s additional Growth, Momentum, Stability and Sentiment ratings.
Stock #2: Chegg, Inc. (CHGG)
CHGG is an education-focused platform that provides various services to help students succeed academically. Its services include subscription-based resources, writing assistance, maths problem-solving tools, and language learning solutions, all of which aim to improve students' learning experiences and academic success.
On August 16, 2023, CHGG increased its securities repurchase program by $200 million, making it possible to repurchase common stock and convertible notes. This comes on top of the $89 million left over from a previous $2 billion repurchase program.
During the third quarter ended September 30, 2023, the company generated net revenues of $157.85 million. It earned non-GAAP gross profit and non-GAAP net income of $116.26 million and $23.16 million. For nine months ended September 30, CHGG's free cash flow grew 19.8% year-over-year to $121.20 million.
For the fourth quarter of 2023, CHGG expects total net revenues of $185 million to $187 million, with subscription services revenues ranging from $164 million to $166 million. It aims for a gross margin of 73% to 74% and anticipates adjusted EBITDA in the range of $62 million to $64 million.
Street expects CHGG’s EPS to rise 11.7% year-over-year to $0.30 for the first quarter ending March 2024. Its revenue is expected to amount to $180.38 million in the same quarter. The company has surpassed the revenue and EPS estimates in each of the trailing four quarters and three quarters, respectively, which is impressive.
The stock has soared 4.5% intraday to close the last trading session at $8.35.
CHGG’s POWR Ratings reflect this positive 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 #15.
In addition to the POWR Ratings stated above, one can see CHGG’s additional POWR Ratings for Momentum, Growth and Sentiment here.
Stock #1: trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates the leading global hotel search engine that allows users to find and compare lodging options from a variety of sources, such as online travel agencies and hotels. Its platform includes a variety of accommodations, and they provide user convenience by providing localized websites and apps in multiple languages.
On November 1, TRVG announced an extraordinary cash dividend of EUR 0.529228 ($0.56768) per share, with the ex-dividend date set for November 14, 2023. The payment of this dividend to American Depositary Shares (ADSs) is still scheduled for November 13, 2023.
Since the dividend is substantial (more than 25% of the ADS price), NASDAQ will apply "due bills" to the ADSs from November 3, 2023, until the payment date on November 13, 2023. During this period, if ADS holders sell their shares, they will also sell their right to the dividend.
On September 5, 2023, TRVG changed its brand marketing strategy to fuel long-term growth due to the success of recent marketing campaigns and the thriving online travel sector. The company intended to re-establish double-digit revenue growth and to emphasize its value in the price-sensitive travel market.
For the third quarter that ended September 30, 2023, TRVG generated total revenue of €157.86 million ($169.34 million) and adjusted EBITDA of €16 million ($17.16 million). Its referral revenue amounted to €156.10 million ($167.45 million).
Also, the selling and marketing costs declined 5.5% year-over-year to €121.68 million ($130.53 million).
As of September 30, 2023, the company offered access to more than 5 million hotels and other types of accommodation in over 190 countries, including over 3.8 million units of alternative accommodation, such as vacation rentals and apartments.
TRVG’s revenue and EPS are expected to increase 1% and 51.8% year-over-year to $123.38 million and $0.05 for the first quarter ending March 2024.
The stock has soared 2.9% intraday to close the last trading session at $1.07.
TRVG’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
TRVG has an A grade for Quality and a B for Value. Within the same industry, it is ranked #9.
To see TRVG’s additional POWR Ratings for Growth, Momentum, Stability, and Sentiment, click here.
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EXPE shares were trading at $113.48 per share on Monday morning, up $0.77 (+0.68%). Year-to-date, EXPE has gained 29.54%, versus a 15.19% 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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