The internet industry is growing considerably, with increased internet penetration worldwide and digitization across almost every sector. Given the industry’s tailwinds, investors could consider buying fundamentally sound internet stocks Coupang, Inc. (CPNG), 1stdibs.Com, Inc. (DIBS), and D-Market Elektronik Hizmetler ve Ticaret A.S. (HEPS) with significant momentum.
Several factors, including the growing availability of high-speed internet, the rising popularity of online activities like streaming and social media, the growth of e-commerce platforms, and digitalization among businesses, are boosting the internet industry’s growth. In 2023, internet users globally stood at 5.3 billion, which accounts for around two-thirds of the world population.
The e-commerce market is expected to reach $8.80 trillion in 2024. The market is further projected to total $18.81 trillion by 2029, growing at a CAGR of 15.8% from 2024 to 2029.
Additionally, favorable government funding and policies to expand internet accessibility bolster the industry’s prospects. The BEAD program, under the Federal Infrastructure Investment and Jobs Act (IIJA), dedicates more than $42 billion to improve nationwide high-speed internet access.
Moreover, technological advances, like faster internet connections like broadband and mobile internet (3G, 4G, and now 5G), have made it easier for people to access high-speed internet from several devices, including smartphones and computers. The global 5G services market size is estimated to hit $664.75 billion by 2028, exhibiting a CAGR of 26.9%.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Internet industry stocks, beginning with the third choice.
Stock #3: Coupang, Inc. (CPNG)
CPNG owns and operates a retail business through its mobile applications and Internet websites, mainly in South Korea. The company operates through the Product Commerce and Developing Offerings segments. It sells products and services in the categories of home goods, apparel, beauty products, groceries, sporting goods, electronics, and more.
On January 31, 2024, CPNG completed the acquisition of the assets of global online luxury company Farfetch Holdings plc. By providing access to $500 million in capital, this strategic acquisition allows Farfetch to continue delivering exceptional services for its brand and boutique partners, and to more than four million customers globally.
CPNG’s trailing-12-month net income margin of 5.58% is 19.6% higher than the industry average of 4.67%. Also, the stock’s trailing-12-month ROCE and ROTA of 41.83% and 10.19% are 271% and 139.8% higher than the industry averages of 11.28% and 4.25%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, CPNG’s total net revenues increased 23% year-over-year to $6.56 billion. Its adjusted EBITDA rose 39% from the prior year’s quarter to $294 million. The company’s adjusted net income and EPS grew 121% and 167% year-over-year to $137 million and $0.08, respectively.
Analysts expect CPNG’s revenue for the first quarter (ended March 2024) to increase 18.6% year-over-year to $6.88 billion. Street expects its EPS for the same quarter to grow 26.1% year-over-year to $0.06. Moreover, the company has surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.
CPNG’s stock has soared 13.8% over the past year to close the last trading session at $18.20. The stock is currently trading above its 50-day and 200-day moving averages of $16.47 and $16.96, indicating an uptrend.
CPNG’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade for Momentum. It is ranked #19 in the 52-stock B-rated Internet industry.
Beyond what is stated above, we’ve also rated CPNG for Quality, Value, Growth, Stability, and Sentiment. Get all CPNG ratings here.
Stock #2: 1stdibs.Com, Inc. (DIBS)
DIBS operates an online marketplace for luxury design products worldwide. The company’s marketplace connects customers with sellers and makers of vintage, antique, and contemporary furniture and home décor, jewelry, watches, art, and fashion products.
During the fourth quarter that ended December 31, 2023, DIBS reported net revenue of $20.92 million. Its gross margin was 71.5%, compared to 70.5% in the fourth quarter of 2022. Also, the company’s cash, cash equivalents and short-term investments amounted to $139.30 million as of December 31, 2023.
As per the guidance for the first quarter of 2024, DIBS expects gross merchandise value (GMV) to range between $83 million and $90 million. Also, the company’s net revenue is expected to be between $20.60 million and $21.90 million for the quarter.
Analysts expect DIBS’s revenue for the fiscal year ending December 2024 to increase 1.3% year-over-year to $85.75 million. Additionally, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is remarkable.
Shares of DIBS have gained 28.2% over the past three months to close the last trading session at $6. CPNG is currently trading above its 50-day and 200-day moving averages of $5.15 and $4.37, indicating an uptrend.
DIBS’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
DIBS has an A grade for Sentiment and a B for Quality, Momentum, and Growth. It is ranked #17 in the same industry.
In addition to the POWR Ratings highlighted above, one can access DIBS’s ratings for Value and Stability here.
Stock #1: 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.
HEPS’s forward EV/Sales of 0.21x is 83% lower than the 1.25x industry average. Likewise, the stock’s forward EV/EBITDA of 3.33x is 65.9% lower than the industry average of 9.76x.
HEPS’s revenue during the fourth quarter ended December 31, 2023, increased 29.5% year-over-year to TRY11.81 billion ($99 billion). GMV 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.
Analysts expect HEPS’s revenue to increase 33.5% year-over-year to $1.23 billion for the fiscal year ending December 2024. The company’s EPS is expected to grow 1.3% year-over-year to $0.03 for the current year.
Shares of HEPS have surged 14.3% over the past six months to close the last trading session at $1.52. The stock is currently trading above its 200-day moving average of $1.50, indicating an uptrend.
HEPS’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.
HEPS has an A grade for Sentiment and a B in Momentum and Value. It is ranked #7 in the same industry.
Click here to access the additional HEPS ratings (Growth, Stability, and Quality).
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CPNG shares were trading at $18.00 per share on Tuesday morning, down $0.20 (-1.10%). Year-to-date, CPNG has gained 11.18%, versus a 9.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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