Even though a plethora of macroeconomic challenges are at the forefront, rising digital transformation is anticipated to bolster the internet sector. Given this backdrop, let us dig into internet stocks, Yelp Inc. (YELP), Opera Limited (OPRA), and trivago N.V. (TRVG) now.
The internet, considered the most crucial tool in a globalized world, has experienced a continuous rise in demand due to rapidly soaring home-office hybrid work environments, online shopping, learning, gaming, communication, and managing finances.
A total of 5.18 billion people globally were using the internet at the start of the second quarter of 2023, which is equivalent to 64.6% of the world’s total population. As per Statista, the population share with internet access in the United States is poised to rise continuously between 2023 and 2028. Internet penetration is estimated to amount to 96% in 2028.
Furthermore, despite the current macroeconomic issues, 5G deployments continue to pick up their pace. Due to the high availability of 5G compatible devices, the global 5G tech market is projected to garner $1.80 trillion by 2030 at a 40.2% CAGR.
Moreover, the government is playing a major role in stimulating demand for high-speed broadband internet services by providing better public online services in every sector, encouraging rural and remote areas to use broadband internet services, and establishing privacy and quality standards.
The global broadband internet services market size is expected to grow to $470.49 billion in 2027 at a CAGR of 3.8%. Furthermore, Investors’ interest in internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 23.3% gains over the past six months.
Against this backdrop, fundamentally strong internet stocks YELP, OPRA, and TRVG could be wise portfolio additions now to garner significant returns.
Yelp Inc. (YELP)
YELP operates a platform that connects consumers with local businesses in the United States and internationally. The company’s platform covers various regional business categories. It also offers free and paid advertising products to businesses.
YELP’s co-founder and CEO said, “We remain focused on executing against our strategic initiatives and are confident in our ability to deliver profitable growth over the long term."
YELP’s trailing-12-month gross profit margin of 91.19% is 83.2% higher than the 49.77% industry average. Its trailing-12-month ROTA of 3.53% is 155.6% higher than the 1.38% industry average.
YELP’s revenue has grown at 6.1% and 7% CAGRs over the past three and five years, respectively. Its EBIT and EBITDA have grown at 79.5% and 30.9% CAGRs over the past three years, respectively.
YELP’s net revenue increased 12.9% year-over-year to $312.44 million for the fiscal first quarter that ended March 31, 2023. Its adjusted EBITDA came in at $54.03 million, up 12.3% year-over-year. Its net cash provided by operating activities increased 23.9% year-over-year to $74.24 million for the same quarter.
YELP raised its fiscal year 2023 net revenue outlook and expects it to be in the range of $1.295 billion to $1.315 billion.
For the fiscal second quarter (ending June 2023), YELP’s EPS is estimated to come in at $0.62, up 69% year-over-year. Analysts expect YELP’s revenue to increase 8.7% year-over-year to $324.97 million for the same quarter. The company surpassed revenue estimates in each of the four trailing quarters, which is impressive.
YELP’s stock has gained 9.7% over the past six months and 1.8% intraday to close its last trading session at $32.21.
YELP’s POWR Ratings reflect a promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has an A grade for Quality and a B for Value. Within the 57-stock Internet industry, YELP is ranked #4.
Beyond what we have stated above, one can see YELP’s ratings for Growth, Stability, Sentiment, and Momentum here.
Opera Limited (OPRA)
Headquartered in Oslo, Norway, OPRA provides mobile and PC web browsers. It has two segments, Browser and News; and Other. The company offers mobile browser products, such as Opera Mini, Opera for Android and iOS, Opera GX Mobile, and Opera Touch; PC browsers; and Opera News, an AI-powered personalized news discovery and aggregation service.
OPRA’s trailing-12-month net income margin of 11.53% is 383% higher than the 2.39% industry average. Its trailing-12-month ROTA of 4.38% is significantly higher than the 0.36% industry average.
OPRA’s revenue has grown at 19.4% CAGR over the past five years. Its net income and EPS have grown at 6.7% and 13.4% CAGRs over the past three years, respectively.
OPRA’s revenue increased 21.6% year-over-year to $87.05 million for the fiscal first quarter that ended March 31, 2023. Its operating profit came in at $13.95 million, up 939.5% year-over-year.
Its net income attributable to owners of the parent and earnings per ADS stood at $15.48 million and $0.17 compared to net loss and loss per ADS of $9.44 million and $0.08 in the previous year’s quarter, respectively.
For the same quarter, its adjusted EBITDA grew 195.8% from its year-ago quarter to $21.74 million, while its free cash flow from operations stood at $23.32 million, up 102.6% year-over-year.
For the full year 2023, OPRA expects its revenue to be between $373 million and $390 million. Also, its adjusted EBITDA is expected to be between $77 million and $83 million.
The consensus EPS estimate of $0.18 for the fiscal third quarter ending September 2023 represents an 80% year-over-year growth. The revenue estimate of $97.84 million for the same quarter represents a 14.6% year-over-year growth. The company surpassed revenue estimates in each of the four trailing quarters.
The stock has gained 159.3% over the past six months and 91.6% over the past three months to close its last trading session at $13.51.
It is no surprise that OPRA has an overall B rating, which equates to Buy in our POWR Ratings system.
OPRA has an A grade for Sentiment and a B for Growth and Value. Within the same industry, it is ranked #3.
To see the additional POWR Ratings for OPRA (Momentum, Stability, and Quality), click here.
trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates a hotel and accommodation search platform globally. The company offers an online meta-search for hotels and accommodations through online travel agencies, hotel chains, and independent hotels.
TRVG’s trailing-12-month gross profit margin of 97.64% is 96.2% higher than the 49.77% industry average. Its trailing-12-month ROTC of 5.81% is 54.6% higher than the 3.76% industry average.
TRVG’s EBITDA and EBIT have grown at 37.5% and 54.2% CAGRs over the past three years, respectively.
For the fiscal first quarter that ended March 31, 2023, TRVG’s total revenue increased 9.2% year-over-year to €111.04 million ($121.44 million). Its operating income stood at €14.76 million ($16.14 million) for the same quarter compared to an operating loss of €4.84 million ($5.30 million) in the previous-year quarter. Adjusted EBITDA stood at €18.60 million ($20.34 million).
Moreover, for the fiscal first quarter that ended March 31, 2023, TRVG’s net income and earnings per share available to common stockholders stood at €9.89 million ($10.81 million) and €0.03 compared to net loss and loss per share of €10.70 million ($11.70 million) and €0.03, respectively, for the prior-year quarter that ended March 31, 2022.
Street expects TRVG’s revenue to rise 7.4% from the prior-year period to $158.69 million for the fiscal second quarter ending June 2023. Furthermore, EPS for the same quarter is expected to come in at $0.06.
The stock has lost marginally over the past six months to close its last trading session at $1.19.
TRVG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates Buy in our proprietary rating system.
TRVG has an A grade for Quality and a B for Growth, Momentum, and Value. Within the same industry, it is ranked second.
Click here for the additional POWR Ratings for Stability and Sentiment for TRVG.
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YELP shares were trading at $32.95 per share on Thursday morning, up $0.74 (+2.30%). Year-to-date, YELP has gained 20.52%, versus a 9.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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