Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. The new habits they’re cultivating are also unlocking the next leg of growth for the industry, which has gained 42.6% over the past six months compared to 11.3% 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. On that note, here are two internet stocks boasting durable advantages and one that may face trouble.
One Consumer Internet Stock to Sell:
eBay (EBAY)
Market Cap: $32.54 billion
Originally known as the first online auction site, eBay (NASDAQ:EBAY) is one of the world’s largest online marketplaces.
Why Are We Cautious About EBAY?
- Struggled to engage its audience as its active buyers averaged 2.9% declines
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2%
- Expenses have increased as a percentage of revenue over the last four years as its EBITDA margin fell by 7 percentage points
At $67.95 per share, eBay trades at 10x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than EBAY.
Two Consumer Internet Stocks to Watch:
Sea (SE)
Market Cap: $75.04 billion
Founded in 2009 and a publicly traded company since 2017, Sea (NYSE:SE) started as a gaming platform and has since expanded to offer a variety of services such as e-commerce, digital payments, and financial services across Southeast Asia.
Why Will SE Outperform?
- People are paying more money to use its platform as its average revenue per user has grown by 30.4% annually
- Demand for the next 12 months is expected to accelerate above its three-year trend as Wall Street forecasts robust revenue growth of 24.8%
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 35.1% annually, topping its revenue gains
Sea’s stock price of $131 implies a valuation ratio of 33.1x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Coupang (CPNG)
Market Cap: $42.51 billion
Founded in 2010 by Harvard Business School student Bom Kim, Coupang (NYSE:CPNG) is an e-commerce giant often referred to as the "Amazon of South Korea".
Why Are We Fans of CPNG?
- Active Customers have grown by 10.3% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 29.7% outpaced its revenue gains
- Free cash flow margin grew by 8.3 percentage points over the last four years, giving the company more chips to play with
Coupang is trading at $23.55 per share, or 25.1x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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