Back to top

Image: Bigstock

These 5 Top Internet Stocks Deserve a Place in Your Portfolio

Read MoreHide Full Article

Internet companies are capitalizing on the exponential growth of data to deliver innovative solutions to address evolving consumer preferences.

Internet-based companies are integrating AI, ML and deep learning into their solutions to incorporate customization capabilities.

For instance, real-time analysis of user data supported by AI tools is helping advertisers target the right audience, which in turn is bolstering return on investment.

Per Cisco’s latest Annual Internet Report, total number of Internet users is envisioned to hit 5.3 billion by 2023 from 3.9 billion in 2018 at a CAGR of 6%. This translates into Internet penetration of 66% by 2023 from 51% in 2018. Markedly, per IDC, global datasphere is expected to reach 175 Zettabytes (ZB) by 2025, which definitely increases the investment appeal of Internet-based companies.

Further, transition to SaaS-based (or Software as a Service) applications boosts demand for cloud infrastructure monitoring, web-based application performance management, human capital management (HCM) and cyber security software, in turn, favoring prospects of Internet-based companies.

Increasing allegiance to online gaming, music and video streaming services are also acting as tailwinds.

Accelerated 5G Rollout to Boost Business Prospects

Rapid deployment of 5G in 2020 is expected to boost growth in digital advertising, rapid adoption of online payment methods, AR/VR, cloud-based gaming, autonomous vehicle technology, smart cities, wearable computing and online delivery services.

Notably, Cisco’s latest report, states that, by 2023, nearly 3X more traffic will be generated by a 5G connection compared with a 4G connection. Moreover, share of Machine-To-Machine (M2M) connections are expected to grow to 50% by 2023, hitting 14.7 billion M2M connections by 2023 from 33% in 2018.

Additionally, rising Internet penetration, particularly in emerging markets including Latin America, Africa and South East Asia, presents significant business expansion opportunities for Internet-based companies.

Making the Right Choice

The optimism surrounding Internet stocks is reflected in the robust performance of Invesco NASDAQ Internet ETF (PNQI) on a year-to-date basis, which has rallied 10.5% compared with the SPDR S&P 500 ETF’s (SPY) growth of 4.7%.

We have zeroed in on five Internet-based stocks that possess strong fundamentals.

With the help of our Zacks Stock Screener, we have filtered stocks that have a favorable combination of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Per Zacks’ proprietary methodology, stocks with this favorable combination offer good investment opportunities.

5 Key Picks

Guangzhou-based Vipshop Holdings (VIPS - Free Report) is an online discount retailer for brands. The company is expected to benefit from strengthening product offerings, through improved product procurement and merchandising strategy, amid the secular trend in online shopping market.

Additionally, deepening focus on high margin generating apparel related business, especially discount apparel business, and strategic acquisition of Shan Shan Outlets that operates five outlets in Ningbo, Taiyuan, Harbin, Zhengzhou and Nanchang holds promise.
 

Over the past 60 days, the consensus mark for 2020 earnings has moved north by 2.5% to $1.24 per share.

Notably, the company currently has a Zacks Rank #1 and a VGM Score of A.

Holon, Israel-based, Perion Network (PERI - Free Report) is riding on an expanding publisher base, increasing number of unique searches and higher revenues per month (RPM).

Moreover, the company’s search business, Codefuel’s improving revenue trajectory driven by product innovation and effective sales effort, holds promise. Further, acquisition of Content IQ (CIQ) is expected to enhance Perion’s digital branding division, Undertone, with more personalization content capabilities.

 

The Zacks Consensus Estimate for earnings for 2020 has improved 13.6% to 67 cents over the past 30 days.

Further, Perion currently has a Zacks Rank #1 and a VGM Score of B.

San Jose, CA-based, eBay EBAY is expected to benefit from ongoing momentum across managed payments and Promoted Listings offerings.

Further, the company’s initiatives toward enhancing seller experience by offering innovative seller tools, and delivering better buyer experience by utilizing structured data, hold promise.

 

eBay Inc. Price and Consensus

eBay Inc. Price and Consensus

eBay Inc. price-consensus-chart | eBay Inc. Quote

The consensus mark for earnings for 2020 has improved almost 7% to $3.07 over the past 30 days.

Notably, the company currently has a Zacks Rank #2 and a VGM Score of B.

Cambridge, MA-based, Akamai Technologies AKAM is expected to gain from robust demand for Kona Site Defender, Prolexic Solutions, new Bot Manager Premier, and Nominum Service.

Growing influence of its new security solutions, including Secure Web Gateway, Multi-Factor Authentication, Page Integrity Manager, Akamai Enterprise Defender and Akamai Identity Cloud, amid rising enterprise spending on cybersecurity, favor business prospects.

Particularly, buyout of KryptCo is expected to aid the company strengthen its Secure Web Gateway solution.
 

The Zacks Consensus Estimate for earnings for 2020 has improved 3.1% to $4.92 over the past 30 days.

Further, Akamai currently has a Zacks Rank #2 and a VGM Score of B.

Dallas, TX-based, Match Group MTCH is well poised to counter competition from Facebook Dating on the back of robust portfolio of online dating services and a first-mover advantage in the space.

Increasing adoption of Tinder Gold subscription package and growing clout of OkCupid across India, are expected to help the company bolster average revenue per user (or ARPU) and subscriber growth. Moreover, sturdy synergies from Meetic, Match, Hinge and PlentyOfFish buyouts hold promise.

The Zacks Consensus Estimate for earnings for 2020 has improved 3.1% to $2.31 over the past 30 days.

Notably, Match Group currently has a Zacks Rank #2 and a VGM Score of B.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Perion Network Ltd (PERI) - free report >>

Vipshop Holdings Limited (VIPS) - free report >>