By breaking down physical barriers, consumer internet businesses are reshaping how people shop, connect, learn, and play. These themes have enabled rapid growth for the industry, which has posted a 26.2% gain over the past six months compared to 21% for the S&P 500.
Nevertheless, investors should tread carefully as many internet companies pursue winner-take-all strategies, meaning losses can be hefty if their playbooks don’t pan out. Keeping that in mind, here are two resilient internet stocks at the top of our wish list and one we’re passing on.
One Consumer Internet Stock to Sell:
Coursera (COUR)
Market Cap: $1.40 billion
Founded by two Stanford University computer science professors, Coursera (NYSE: COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.
Why Do We Think Twice About COUR?
- Customer spending has dipped by 7.3% on average as it focused on growing its customers
- Estimated sales growth of 6% for the next 12 months implies demand will slow from its three-year trend
- Highly competitive market means it’s on the never-ending treadmill of sales and marketing spend
At $8.40 per share, Coursera trades at 20.4x forward EV/EBITDA. If you’re considering COUR for your portfolio, see our FREE research report to learn more.
Two Consumer Internet Stocks to Watch:
Take-Two (TTWO)
Market Cap: $47.29 billion
Best known for its Grand Theft Auto and NBA 2K franchises, Take Two (NASDAQ: TTWO) is one of the world’s largest video game publishers.
Why Is TTWO Interesting?
- Annual revenue growth of 17.1% over the last three years beat the sector average and underscores the popularity of its platform
- Exciting sales outlook for the upcoming 12 months calls for 30.2% growth, an acceleration from its three-year trend
- Highly efficient business model is illustrated by its impressive 14.2% EBITDA margin
Take-Two is trading at $256.90 per share, or 29x forward EV/EBITDA. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .
Alphabet (GOOGL)
Market Cap: $3.40 trillion
Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ: GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.
Why Will GOOGL Beat the Market?
- Alphabet’s dominant Google Search sits on the pantheon of the best businesses ever. This is reflected in its robust long-term revenue growth and elite operating margin.
- The company’s profit margins have become even higher over time, speaking to its scale advantages and operating efficiency not only in its core Search business but also in Google Cloud Platform and YouTube.
- Revenue growth and increasing operating margins are the key ingredients for strong EPS growth. Google has these, and when also factoring in its share repurchases, you can see why EPS has exploded over the long term.
Alphabet’s stock price of $280.70 implies a valuation ratio of 26.5x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
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