Whether it be online shopping or social media, secular forces are propelling consumer internet businesses forward. The new habits they’re cultivating are also unlocking the next leg of growth for the industry, which has gained 11.8% over the past six months, almost identical to the S&P 500.
Although these companies have produced results, only those with the widest moats will survive as emerging red-hot players pop up regularly to take their slice of the pie. Keeping that in mind, here are three internet stocks we think can generate sustainable market-beating returns.
Alphabet (GOOGL)
Market Cap: $4.19 trillion
Started by Stanford students Larry Page and Sergey Brin in a Menlo Park garage, Alphabet (NASDAQ:GOOGL) is the parent company of the eponymous Google Search engine, Google Cloud Platform, and YouTube.
Why Are We Bullish on GOOGL?
Alphabet’s dominant Google Search sits on the pantheon of the best businesses ever. This is reflected in its robust long-term revenue growth and elite operating margin.
The company’s profit margins have become even higher over time, speaking to its scale advantages and operating efficiency not only in its core Search business but also in Google Cloud Platform and YouTube.
Revenue growth and increasing operating margins are the key ingredients for strong EPS growth. Google has these, and when also factoring in its share repurchases, you can see why EPS has exploded over the long term.
At $343.95 per share, Alphabet trades at 25.9x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Remitly (RELY)
Market Cap: $5.39 billion
With Amazon founder Jeff Bezos as an early investor, Remitly (NASDAQ:RELY) is an online platform that enables consumers to safely and quickly send money globally.
Why Is RELY a Good Business?
Has the opportunity to boost monetization through new features and premium offerings as its active customers have grown by 25.8% annually over the last two years
Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 163% outpaced its revenue gains
Free cash flow margin jumped by 43.1 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Remitly is trading at $25.65 per share, or 11.5x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
