The Internet sector’s prospects appear promising due to the growing popularity of online services and the convenience offered by online digital platforms. More and more businesses are expected to take their business online in order to capitalize on these opportunities in the future.
Considering the industry’s bright prospects, investors could consider adding quality internet stocks Fiverr International Ltd. (FVRR), Liquidity Services, Inc. (LQDT), D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS), and TrueCar, Inc. (TRUE) to their watchlist. Before delving deeper into their fundamentals, let’s discuss what’s shaping the internet industry’s prospects.
The internet industry's growth is being fueled by digitization and advancements in hardware, software, high-speed internet connectivity, and on-demand digital services. This has led to an increased reliance on online platforms for work, education, entertainment, and communication. As technologies continue to evolve, the internet industry is expected to expand even further in the coming years.
According to DataReportal, 5.35 billion people worldwide used the internet at the beginning of 2024, accounting for 66.2% of the entire population. Internet users continue to rise, with the most recent data showing that the world’s connected population increased by 97 million users in the twelve months to January 2024.
Moreover, the Internet industry is projected to grow further due to the rising popularity of e-commerce, adoption of cloud-based services, use of 5G networks, IoT-connected devices, growing trend of remote work, and online learning. The global internet service market is projected to grow at a CAGR of 4.4% to reach $733.79 billion by 2031.
Furthermore, the global wireless internet services market is projected to reach $921.97 billion in 2027, growing at a CAGR of 7%. Investors’ interest in Internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 38.1% gains over the past year.
In light of these encouraging trends, let’s look at the fundamentals of the four above-mentioned internet stocks.
Fiverr International Ltd. (FVRR)
Headquartered in Tel Aviv, Israel, FVRR operates an online marketplace worldwide. Its platform enables sellers to sell their services and buyers to buy them. The company’s platform includes approximately 600 categories in ten verticals, including graphic design, digital marketing, writing, translation, video, and more.
In terms of the trailing-12-month gross profit margin, FVRR’s 82.89% is 170.9% higher than the 30.59% industry average. Likewise, its 16.51% levered FCF margin is 150.1% higher than the 6.60% industry average.
For the fiscal fourth quarter that ended December 31, FVRR’s revenue increased 10.1% year-over-year to $91.50 million. Its non-GAAP gross profit rose 12% year-over-year to $77.37 million.
For the same quarter, its non-GAAP net income and non-GAAP net income per share attributable to ordinary shareholders increased 115% and 115.4% year-over-year to $23.10 million and $0.56, respectively. In addition, its adjusted EBITDA rose 71.5% from the prior-year quarter to $16.11 million.
FVRR’s revenue and EPS for the quarter ended March 31, 2024, are expected to increase 5.1% and 25.3% year-over-year to $92.47 million and $0.45, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has declined 5.9% over the past month to close the last trading session at $20.11.
FVRR’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FVRR has an A grade for Growth and a B for Value and Quality. Within the B-rated Internet industry, it is ranked #6 out of 53 stocks. To see FVRR’s additional ratings for Momentum, Stability, and Sentiment, click here.
Liquidity Services, Inc. (LQDT)
LQDT provides e-commerce marketplaces, self-directed auction listing tools, and value-added services in the United States and internationally. It operates through four segments: GovDeals, Retail Supply Chain Group (RSCG), Capital Assets Group (CAG), and Machinio.
LQDT’s trailing-12-month asset turnover ratio of 1.14x is 44.9% higher than the industry average of 0.79x. Likewise, the stock’s trailing-12-month Return on Total Capital of 8.58% is 22.1% higher than the industry average of 7.03%. Additionally, its 6.79% trailing-12-month Return on Total Assets is 42.2% higher than the industry average of 4.78%.
LQDT’s total revenue for the fiscal first quarter ended December 31, 2023, came in at $71.33 million. Its non-GAAP net income stood at $4.33 million. Its non-GAAP earnings per common share came in at $0.14.
Also, its total current liabilities came in at $107.10 million as of December 31, 2023, compared to $120.72 million as of September 30, 2023.
Analysts expect LQDT’s EPS for the quarter that ended March 31, 2024, to increase 5% year-over-year to $0.21. Its revenue for the quarter ending June 30, 2024, is expected to increase marginally year-over-year to $80.82 million. LQDT’s shares have gained 29.7% over the past year to close the last trading session at $16.90.
It’s no surprise that LQDT has an overall B rating, equating to a Buy in our POWR Ratings system.
It has an A grade for Quality and a B for Stability and Sentiment. It is ranked #2 out of 28 stocks in the Internet - Services industry. Beyond what is stated above, we’ve also rated LQDT for Growth, Value, and Momentum. Get all LQDT ratings here.
D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS)
Headquartered in Istanbul, Turkey, HEPS operates e-commerce platforms in Turkey. The company operates www.hepsiburada.com, a retail website that provides its retail customers with a range of merchandise, including electronics and non-electronics products, such as books, sports, toys, kids and baby products, cosmetics, furniture, etc.
In terms of the trailing-12-month asset turnover ratio, HEPS’ 2.57x is 157.2% higher than the 1x industry average. Likewise, its 3.24% trailing-12-month CAPEX / Sales is 6.7% higher than the industry average of 3.04%.
During the fourth quarter ended December 31, 2023, HEPS’ revenue increased 29.5% year-over-year to TRY11.81 billion ($99 billion). Its gross merchandise value grew 25.4% year-over-year to TRY 40.10 billion ($1.24 billion). The company’s EBITDA rose to TRY 129.10 million ($3.99 million) compared to negative TRY 415.10 million ($12.84 million) in the fourth quarter of 2022.
Furthermore, the company’s free cash flow came in at TRY 2.85 billion ($88.19 million), up 63.2% year-over-year.
Street expects HEPS’ revenue and EPS for the fiscal year ending December 31, 2024, to increase 34.5% and 1.3% year-over-year to $1.23 billion and $0.03, respectively. Over the past year, the stock has gained 22.9% to close the last trading session at $1.29.
HEPS’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value and Momentum. It is ranked #7 in the Internet industry. Click here to see HEPS' ratings for Growth, Stability, and Quality.
TrueCar, Inc. (TRUE)
TRUE operates as an internet-based information, technology, and communication services company in the United States. It operates its platform on the TrueCar website and mobile applications. Its platform enables users to obtain market-based pricing data on new and used cars, and to connect with its network of TrueCar certified dealers.
TRUE’s trailing-12-month gross profit margin of 90.15% is 82.3% higher than the industry average of 49.44%. Its trailing-12-month asset turnover ratio of 0.70x is 44.2% higher than the industry average of 0.48x. Additionally, its trailing-12-month CAPEX / Sales of 7.44% is 102.6% higher than the industry average of 3.67%
For the fiscal fourth quarter ended on December 31, 2023, TRUE’s revenues increased 12.6% year-over-year to $41.29 million. Its adjusted EBITDA rose to $2.06 million compared to $9.99 million in the fourth quarter of 2022.
Also, its total current liabilities came in at $28.98 million as of December 31, 2023, compared to $30.78 million as of December 31, 2022. The company’s total liabilities came in at $44.11 million, compared to $54.26 million for the same period.
Analysts expect TRUE’s revenue for the quarter ended March 31, 2024, to increase 10.2% year-over-year to $40.74 million. Shares of TRUE have gained 35.4% over the past six months to close the last trading session at $2.87.
TRUE’s promising outlook is reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth and Sentiment. Within the Internet - Services industry, TRUE is ranked #3. To access TRUE’s Value, Momentum, Stability, and Quality ratings, click here.
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FVRR shares were trading at $20.17 per share on Thursday afternoon, up $0.06 (+0.30%). Year-to-date, FVRR has declined -25.90%, versus a 6.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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