The growing global penetration of the Internet and the rapid digitization of business operations in nearly every industry have positioned the Internet industry for substantial growth and expansion this year and beyond. The introduction of innovative new digital technologies such as 5G has further amplified the prospects of the sector.
Therefore, to capitalize on the industry’s growth trajectory, we believe it may be wise to invest in fundamentally strong internet stocks Booking Holdings Inc. (BKNG), Expedia Group, Inc. (EXPE), and CarGurus, Inc. (CARG) for solid returns.
Lets understand this in detail.
As digitalization is gaining momentum globally, businesses and individuals increasingly rely on fast and uninterrupted internet connections for information, education, communication and leisure. As of 2023, Internet users make up 64.4% of the world’s population, with a staggering 5.16 billion active users worldwide.
The industry is seeing significant growth through companies leveraging a robust online presence, expanding offerings, expanding reach, and operating around the clock across multiple e-commerce platforms. This year, the global e-commerce market is projected to reach $6.30 trillion and over $8.10 trillion by 2026.
The advent of 5G technology is further driving the burgeoning growth of the internet industry by providing faster internet speeds and improved connectivity. The use of fixed wireless access, cloud-based infrastructure and the growing adoption of Internet of Things (IoT) devices also reinforce the promising prospects of the sector.
According to a report by ReportLinker, the global wireless Internet services market is estimated to grow at a CAGR of 7%, reaching $921.97 billion by 2027.
Additionally, investor interest in internet stocks is evident by the First Trust Dow Jones Internet Index Funds (FDN) returns of 36.6% over the past six months.
Given the sector’s promising growth prospects, quality Internet stocks BKNG, EXPE and CARG could be ideal investments now.
Let’s take a closer look at the fundamentals of these stocks.
Reservation Holdings Inc. (BKNG extension)
BKNG provides online travel and restaurant reservations and related services. Its brands include Booking.com, Priceline.com, agoda.com, Rentalcars.com, KAYAK and OpenTable. The company offers accommodation reservation services in more than 220 countries, with 400,000 properties available in over 40 languages.
On June 28, Asia-based BKNG’s digital travel platform Agoda announced its foray into wholesale distribution. Renowned for its strategic partnership solutions and white-label products, Agoda uses its expertise to develop a cutting-edge wholesale distribution platform.
The unique feature of the Agoda product lies in its transparency and flexibility, allowing hotel chains to monitor the activity of distributors and gain greater visibility into rates and inventory consumption. By introducing this innovation, Agoda aims to strengthen its bond with global hotel partners and streamline the intricate distribution process.
On June 27, BKNG announced its new AI Trip Planner, which was launched in beta for select US travelers. The company offers a conversational and user-friendly trip planning experience by incorporating OpenAI’s ChatGPT API. This innovative launch should bode well for the company.
For the first quarter ended March 31, 2023, BKNG’s revenues increased 40.2% year-over-year to $3.78 billion. Its Adjusted EBITDA was up 89 percent from a year ago to $586 million. In addition, the company’s net income and earnings per share were $266 million and $7, respectively, compared with a loss and loss per share of $700 million and $17.10 in the prior years period. .
Consensus revenue estimate of $20.65 billion for the fiscal year (ending December 2023) reflects a 20.8% year-over-year improvement. Similarly, the consensus estimate for year-over-year EPS of $137.76 points to a 38% year-over-year increase. Additionally, the company topped consensus estimates for EPS in all four trailing quarters, which is impressive.
Over the past six months, the stock has gained 36.1% to close the last trading session at $2,666.47.
BKNG’s solid fundamentals are evident in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. POWR ratings are calculated considering 118 different factors, each optimally weighted.
BKNG has an A grade for Quality and B for Momentum. It ranks ninth in the internet sector with 58 shares.
In addition to the POWR ratings I just highlighted, here you can see BKNG ratings for growth, value, stability, and sentiment.
Expedia Group, Inc. (ESP)
EXPE is an online travel company. Its Retail segment provides global advertising and travel services, while its B2B segment focuses on Expedia Partner Solutions. Additionally, the Trivago segment generates advertising revenue through referrals to online travel companies and service providers via its hotel metasearch websites.
On May 1, 2023, EXPE and SoFi Technologies, Inc. (SOFI) introduced SoFi Travel powered by Expedia, enabling SoFi members to save money and earn rewards while traveling. Through the SoFi Travel portal, members can conveniently book flights, hotels, car rentals, travel packages and experiences at discounted SoFi member prices.
EXPE will facilitate the travel search and booking system, ensuring a smooth booking experience through the SOFI app or website. Members will have access to EXPE’s full customer service team for assistance with reservations and travel. Such partnerships allow EXPE to expand its operations and contribute to a better user experience.
Additionally, on April 19, Expedia Group Media Solutions, EXPE’s global travel advertising platform, launched a new media platform that allows travelers to buy and book travel while watching travel content. Through a partnership with Brand USA, EXPE aims to leverage this purchasable technology to connect movie and TV streaming with travel marketing, driving more travel bookings.
For the first quarter ended March 31, 2023, EXPE revenues increased 18.5% year over year to $2.67 billion. Its Adjusted EBITDA increased 6.9% from a year ago value to $185 million. In addition, cash inflow from operating activities increased 5.5% year over year to $3.16 billion.
Analysts expect EXPE’s revenue to grow 10.8% year over year to $12.92 billion for the fiscal year ending December 2023. Similarly, the company’s EPS is expected to come in at 9, $37 for the current year, a 38% year over year improvement. . Additionally, the company topped consensus estimates for revenue in three of the previous four quarters.
The stock has gained 29.4% over the past six months, closing the last trading session at $108.33.
EXPE’s positive outlook is reflected in its POWR ratings. The title has an overall rating of B, which translates to Buy in our proprietary rating system.
EXPE has an A rating for Quality and a B rating for Growth, Value and Momentum. It is ranked fifth out of 58 stocks in the Internet sector.
Click here for more EXPE ratings (stability and sentiment).
CarGurus, Inc. (CARG)
CARG operates an online automotive marketplace that connects buyers and sellers of new and used cars. Its segments include the US market and digital wholesale. The company operates online marketplaces in Canada, the UK and the US under the CarGurus, Autolist, CarOffer and PistonHeads brands.
On June 26, CARG announced the launch of the CarGurus ChatGPT plugin to help shoppers find their ideal car faster. By improving the user experience, this innovative solution should attract more customers, increase sales and ultimately generate profits for the company.
For the first quarter ended March 31, 2023, CARG’s market revenue increased 2.4% year over year to $167.13 million. Its interest income has grown significantly from its year-ago value to $3.74 million. In addition, his other net income was $595k, compared to a loss of $156k over the prior years period.
Additionally, as of March 31, 2023, the company’s total assets were $1.05 billion, up from $927.10 million as of December 31, 2022.
Consensus revenue estimate of $1.08 billion for the fiscal year (ending December 2024) reflects a 14.6% year-over-year improvement. Similarly, the consensus estimate of $1.04 EPS for the same period points to a 9.2% year-over-year increase. Additionally, the company topped consensus revenue and earnings estimates in three of its trailing four quarters.
CARG shares have gained 70.7% over the past six months to close the latest trading session at $22.76.
CARG’s solid outlook is evident in its POWR ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
CARG has an A grade for Quality and a B for Value and Feeling. It ranked sixth out of 58 stocks within the same industry.
Click here to access additional CARG ratings for Momentum, Stability and Growth.
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BKNG shares were flat in pre-market trading on Thursday. Since the beginning of the year, BKNG has gained 32.31%, compared to a 15.06% increase in the benchmark S&P 500 index over the same period.
About the author: Aanchal Sugandh
Aanchal’s passion for the financial markets drives his work as an investment analyst and journalist. He has a bachelor’s degree in finance and is pursuing the CFA program. He is adept at assessing the long-term prospects of stocks with his fundamental analysis skills. His goal is to help investors build portfolios with sustainable returns. Moreover…
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