Whether it be online shopping or social media, secular forces are propelling consumer internet businesses forward. These themes have enabled rapid growth for the industry, which has posted a 8.9% gain over the past six months. This was a good place to be as the S&P 500 shed 1.1% of its value.
However, long-term winners that can stand the test of time are rare in this space because competition is fierce with many well-capitalized companies. Keeping that in mind, here are three internet stocks boasting durable advantages.
Booking (BKNG)
Market Cap: $141 billion
Formerly known as The Priceline Group, Booking Holdings (NASDAQ:BKNG) is the world’s largest online travel agency.
Why Should You Buy BKNG?
- Room Nights Booked have grown by 13.6% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its growing cash flow gives it even more resources to deploy
Booking is trading at $4,365 per share, or 15.9x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Carvana (CVNA)
Market Cap: $22.35 billion
Known for its glass tower car vending machines, Carvana (NYSE:CVNA) provides a convenient automotive shopping experience by offering an online platform for buying and selling used cars.
Why Are We Fans of CVNA?
- Word-of-mouth marketing drives organic user growth, eliminating the need for costly advertising campaigns
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 46.4% over the last three years outstripped its revenue performance
- Free cash flow margin grew by 30.6 percentage points over the last few years, giving the company more chips to play with
Carvana’s stock price of $173.21 implies a valuation ratio of 12.9x forward EV-to-EBITDA. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Expedia (EXPE)
Market Cap: $20.24 billion
Originally founded as a part of Microsoft, Expedia (NASDAQ:EXPE) is one of the world’s leading online travel agencies.
Why Do We Like EXPE?
- Room Nights Booked have increased by an average of 11% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Superior platform functionality and low servicing costs are reflected in its best-in-class gross margin of 88.6%
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 104% exceeded its revenue gains over the last three years
At $159.97 per share, Expedia trades at 6.8x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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