Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. Despite the tailwinds, their demand largely hinges on consumer spending habits, which investors believe are weakening. As a result, the industry has pulled back by 11.5% over the past six months. This drop is a far cry from the S&P 500’s 13.2% ascent.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one internet stock boasting a durable advantage and two we’re steering clear of.
Two Consumer Internet Stocks to Sell:
Bumble (BMBL)
Market Cap: $412.2 million
Started by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ: BMBL) is a leading dating app built with women at the center.
Why Do We Think Twice About BMBL?
- Struggled with new customer acquisition as its paying users averaged 3.1% declines
- Concerning trends in both user engagement and monetization suggest its platform’s efficacy is declining as its average revenue per buyer fell by 16.8% annually
- Estimated sales decline of 10.6% for the next 12 months implies an even more challenging demand environment
Bumble is trading at $3.14 per share, or 2.8x forward EV/EBITDA. If you’re considering BMBL for your portfolio, see our FREE research report to learn more.
Coursera (COUR)
Market Cap: $1.55 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 Are We Hesitant About COUR?
- Estimated sales growth of 6.3% for the next 12 months implies demand will slow from its three-year trend
- High servicing costs result in an inferior gross margin of 54.5% that must be offset through higher volumes
- Excessive marketing spend signals little organic demand and traction for its platform
At $5.40 per share, Coursera trades at 2.3x forward EV/EBITDA. Read our free research report to see why you should think twice about including COUR in your portfolio.
One Consumer Internet Stock to Buy:
Lyft (LYFT)
Market Cap: $5.00 billion
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Are We Bullish on LYFT?
- Active Riders have grown by 12.9% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 69.1% over the last three years outstripped its revenue performance
- Free cash flow margin increased by 24.1 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Lyft’s stock price of $13.19 implies a valuation ratio of 6.6x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
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