The internet has become an integral part of our daily lives, and its influence continues to expand. With increasing internet penetration, rising smartphone adoption, and technological advancements, the demand for internet services is on an upward trajectory.
Given this backdrop, it could be a smart move to add the fundamentally sound stocks Perion Network Ltd. (PERI), Upwork Inc. (UPWK), and Liberty TripAdvisor Holdings, Inc. (LTRPA) to your watchlist this week.
As of January 2023, the global internet user base reached a staggering 5.16 billion individuals, accounting for approximately 64.4% of the world's population. Furthermore, out of this remarkable figure, an impressive 4.76 billion people (59.4%) of the global population actively engage with social media platforms.
These statistics highlight the widespread adoption and immense reach of the internet and social media, underlining the vast potential and opportunities available for businesses operating in the internet services sector.
Additionally, with the pandemic necessitating more remote work, internet usage is increasing at an extraordinary rate worldwide. Businesses and enterprises are implementing digital content creation tools on social media platforms for their sales and promotion.
The internet knows no geographical boundaries, allowing internet services companies to operate on a global scale. This global reach presents a vast addressable market for companies in this sector, providing ample opportunities for revenue expansion and international growth.
The global internet services market is estimated to reach $644.87 billion by 2029, exhibiting a CAGR of 4.4% over the six years.
With that being said, let us evaluate the fundamentals of the above-mentioned stock in detail.
Perion Network Ltd. (PERI)
Headquartered in Holon, Israel, PERI provides digital advertising solutions to brands, agencies, and publishers in North America, Europe, and internationally. The company operates across the three main pillars of digital advertising – ad search, social media, and display, including video and CTV advertising.
On April 3, PERI announced a significant increase in the adoption of SORT®, its revolutionary solution that prioritizes anonymity and privacy. As the focus on Environmental, Social, and Governance (ESG) initiatives continues to expand, privacy concerns regarding the collection, storage, and utilization of personal data have become even more pronounced among consumers.
According to PERI's recent survey of SORT® users, 67% of respondents consider privacy-safe solutions crucial for their brand image. This should help attract new customers and outperform other solutions.
For the first quarter that ended March 31, 2023, PERI’s total revenue increased 15.8% year-over-year to $145.15 million. Its income from operations grew 48.5% from the year-ago value to $24.50 million.
The company’s non-GAAP net income and non-GAAP EPS amounted to $29.90 million and $0.60, representing an increase of 44.2% and 36.4% from the prior-year period, respectively. Also, its adjusted EBITDA increased 37.9% from the year-ago value to $31.27 million.
Street expects PERI’s revenue and EPS for the second quarter (ending June 30, 2023) to increase 15.7% and 25.2% year-over-year to $169.74 million and $0.51, respectively. Moreover, it surpassed the EPS and revenue estimates in each of the trailing four quarters, which is excellent.
PERI’s revenue and net income have increased at CAGRs of 34.1% and 102.3%, respectively, over the past three years, while its EBITDA has improved at a 73.8% CAGR.
The stock’s trailing-12-month ROTA of 12.70% is 862.2% higher than the industry average of 1.32%. Also, its trailing-12-month net income margin and ROCE of 16.29% and 19.59% are 479.6% and 511.3% higher than the 2.81% and 3.20% industry averages, respectively.
PERI’s shares have gained 69.6% over the past year to close the last trading session at $32.93.
PERI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Sentiment, and Quality. In the 28-stock Internet - Services industry, it is ranked #3. To see additional POWR Ratings of PERI for Growth, Momentum, and Stability, click here.
Upwork Inc. (UPWK)
UPWK operates an online work marketplace that enables businesses to find, hire, and pay freelancers for short-term and longer-term projects across a wide range of categories, including sales and marketing, customer service, design and creative, website and app development, etc.
On February 13, UPWK unveiled a substantial expansion of its services, marking the introduction of full-time hiring options for all customers. This latest enhancement offers a comprehensive solution that allows businesses of any size to easily discover, evaluate, recruit, integrate, and compensate highly skilled professionals for full-time positions, eliminating the typical complications involved in global hiring.
UPWK’s total revenue increased 13.8% year-over-year to $160.86 million in the first quarter (ended March 31, 2023), while its non-GAAP gross profit rose 16.5% from the year-ago value to $120.85 million.
The company’s net income amounted to $17.17 million and $0.13 per share versus a net loss of $24.74 million and $0.19 per share, respectively, in the same period last year.
Analysts expect UPWK’s revenue to increase 3.6% year-over-year to $162.56 million for the second quarter (ending June 30, 2023). Its EPS is expected to improve by 97.4% year-over-year in the same period. Moreover, it topped the EPS and revenue estimates in each of the trailing four quarters.
Its revenue and total assets have grown at 26.5% and 23.9% CAGRs over the past three years, respectively. Over the same period, its tang book value increased at a CAGR of 7.4%.
UPWK’s trailing-12-month levered FCF margin of 5.15% is marginally higher than the 5.08% industry average. Likewise, its trailing-12-month gross profit margin of 74.46% is 149.4% higher than the industry average of 29.85%.
The stock has gained marginally over the past five days to close the last trading session at $8.05.
UPWK’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value and Quality. Within the same industry, it is ranked #6. Click here to see the additional ratings for UPWK (Growth, Momentum, Stability, and Sentiment).
Liberty TripAdvisor Holdings, Inc. (LTRPA)
LTRPA operates as a travel guidance platform that operates through three segments: Tripadvisor Core; Viator; and TheFork. Its travel platform provides content, price comparison tools, and online reservation and related services for destinations, accommodations, travel activities and experiences, and restaurants.
LTRPA’s total revenue increased 41.6% year-over-year to $371 million in the first quarter (ended March 31, 2023), while its adjusted OIBDA grew 20% from the year-ago value to $30 million. During the same period, its total current assets and cash and cash equivalents amounted to $1.47 billion and $1.16 billion, up 12.8% and 10.4% compared to $1.30 billion and $1.05 billion as of December 31, 2022, respectively.
Its revenue and EBIT have grown at 3.1% and 6.7% CAGRs over the past three years, respectively. Likewise, its levered FCF improved at a CAGR of 36.9% over the same period.
In terms of trailing-12-month LTRPA’s gross profit margin of 78.20% is 57.2% higher than the 49.76% industry average. In addition, its trailing-12-month levered FCF margin of 24.30% compares to the industry average of 7.36%.
The stock gained 4.6% intraday to close the last trading session at $0.66.
It’s no surprise that LTRPA has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Value, Momentum, Sentiment, and Quality. Out of 28 stocks in the same industry, it is ranked #4.
In addition to the POWR Ratings we stated above, we also have LTRPA’s ratings for Growth and Stability. Get all LTRPA ratings here.
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PERI shares were trading at $32.71 per share on Tuesday afternoon, down $0.22 (-0.67%). Year-to-date, PERI has gained 29.29%, versus a 8.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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