Online travel booking company Expedia (EXPE Quick QuoteEXPE - Free Report) seems to be in troubled waters. In the last reported quarter, the company disappointed with its earnings results. Also, it carries a Zacks Rank #5 (Strong Sell), with a weak earnings history.

What Happened Last Quarter

The company reported disappointing fourth-quarter earnings of 97 cents per share which missed the Zacks Consensus Estimate of $1.11. This was because the company increased its expenditure on acquisitions.

Expedia has embarked on a large number of acquisitions to strengthen its position in the domestic market and expand internationally. But while this has increased its top line, it has brought on board a variety of different businesses that have to be integrated into its core. Moreover, these businesses require separate marketing and promotion costs, which could be a reason why these costs are rising exponentially.

The company’s quarterly revenues fell 18.9% sequentially to $2.09 billion.However, revenues were up 23.3% year over year and ahead of the Zacks Consensus Estimate of $2.07 billion. Also, gross bookings decreased 13.4% sequentially.

Weak Outlook for the Upcoming Quarter

Expedia expects revenue and profitability to be negatively impacted, as Easter has shifted to the second quarter this year. The company expects pressure on margin early this year due to investments in selling & marketing ahead of the travel season.

In terms of technology & content expense, Expedia expects spending to increase a shade faster than revenues in the upcoming quarter. Also, for 2017, the company expects additional spending to be largely offset by lower infrastructure CapEx requirements.

Downward Earnings Revisions

Right now, Expedia’s earnings picture doesn’t look good. In the last 60 days, three out of five analysts revised their earnings estimates downward for the current quarter. The Zacks Consensus Estimate for this quarter also shrank considerably in the last 30 days, deteriorating from a loss of 22 cents to a loss of 27 cents. 

Also, Expedia missed our earnings consensus estimate twice in the last four quarters. 

Coming to the price performance, over the past one year, shares of Expedia underperformed the Zacks categorized Electronic Commerce industry. While the industry gained 38.34%, the stock returned 20.26%.

Turnaround Efforts

However, Expedia is not sitting on its hands. To counter the current market conditions, management is refocusing on operational formula, expansion of supply portfolio, optimization of marketing channels globally and growth of repeat user base.

These measures might seem impressive initially but could take some time before yielding results. As of now, it is advisable to steer clear of Expedia.

4 Internet Stocks to Consider

Understandably, there is nothing that boosts confidence in Expedia's stock right now. Nevertheless, the technology sector still has a few promising stocks to offer.

This is where our Zacks proprietary methodology comes in handy. Our research shows that stocks with VGM Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 emerge as good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

By using our screener, we bring forth four such stocks:

MeetMe Inc. owns and operates a social network. The company enables users to meet new people through social games and apps, monetized by both advertising and virtual currency. MeetMe carries a Zacks Rank #2 (Buy) and has a VGM score of A. Shares of this company have increased nearly 15.8% year to date. Moreover, its long-term EPS growth rate is a whopping 20%.

Also, the stock has a forward P/E of 11.9x, which is a lot lower than the industry average of 23.8x.

Alphabet (GOOGL Quick QuoteGOOGL - Free Report) is one of the leading providers of target-based advertisements on the web.Revenues come from ads served alongside, with the company’s page ranking and text-matching technology and infrastructure facilitating the process.

This Mountain View, California-based company has a Zacks Rank #2 and a VGM score of B. Shares have increased nearly 11.8% in the last one year. Moreover, it has a long-term EPS growth rate of 16.25%.

Bazaarvoice, Inc. (BV Quick QuoteBV - Free Report) provides social commerce solutions through Bazaarvoice, a Software-as-a-Service platform that enables clients to capture, display, and analyze online word of mouth.

This company has a Zacks Rank #2 and a VGM score of B. Shares have increased nearly 38.10% in the last one year. Also, the company has a decent history of earnings beats. Bazaarvoice surpassed the Zacks Consensus Estimate thrice in the last four quarters, averaging a positive surprise of 52.58%.

VeriSign (VRSN Quick QuoteVRSN - Free Report) provides Internet infrastructure services that include domain name registry services and infrastructure assurance services. It is well positioned to benefit from strong growth in both developed and emerging economies. VeriSign carries a Zacks Rank #2 and has a VGM score of B. Shares of this company have increased nearly 14.60% year to date.

Also, the stock has a forward P/E of 24.4x, which is slightly lower than the industry average of 24.5x.

Looking Ahead

These stocks have managed to grab the spotlight with their remarkable performances, supported by solid earnings results and strong growth projections. Keeping this in mind, we believe parking your money in these stocks would yield high returns in the short term.

Where Do Zacks' Investment Ideas Come From?

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