Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. This influence cuts both ways though because they have high exposure to the ups and downs of consumer spending, and the market seems to believe the tide is turning in the wrong direction - over the past six months, the industry has tumbled by 13.2%. This drawdown is a noticeable divergence from the S&P 500’s 11.6% return.
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 swiping left on.
Two Consumer Internet Stocks to Sell:
Match Group (MTCH)
Market Cap: $8.37 billion
Originally started as a dial-up service before widespread internet adoption, Match (NASDAQ: MTCH) was an early innovator in online dating and today has a portfolio of apps including Tinder, Hinge, Archer, and OkCupid.
Why Are We Cautious About MTCH?
- Intense competition is diverting traffic from its platform as its payers fell by 4.5% annually
- Concerning trends in both user engagement and monetization suggest its platform’s efficacy is declining as its average revenue per user fell by 12.1% annually
- Sales are projected to tank by 1.1% over the next 12 months as demand evaporates
At $35.79 per share, Match Group trades at 9x forward EV/EBITDA. To fully understand why you should be careful with MTCH, check out our full research report (it’s free).
LendingTree (TREE)
Market Cap: $505.8 million
Using the same comparison model that revolutionized travel booking, LendingTree (NASDAQ: TREE) operates an online platform that connects consumers with financial service providers across mortgages, personal loans, credit cards, insurance, and other financial products.
Why Are We Wary of TREE?
- High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum
LendingTree’s stock price of $36.43 implies a valuation ratio of 0.4x forward price-to-gross profit. Check out our free in-depth research report to learn more about why TREE doesn’t pass our bar.
One Consumer Internet Stock to Buy:
Roku (ROKU)
Market Cap: $18.34 billion
With a name meaning six in Japanese because it was the founder's sixth company that he started, Roku (NASDAQ: ROKU) makes hardware players that offer access to various online streaming TV services.
Why Will ROKU Beat the Market?
- Total Hours Streamed are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 31.8% annually, topping its revenue gains
- Free cash flow margin jumped by 25 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Roku is trading at $124.34 per share, or 22.9x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
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