The internet industry is expected to thrive due to accelerated digitalization, smart infrastructure expansion, and government efforts. Moreover, the rise of e-commerce, online services, and digital platforms are boosting the industry.
Given this backdrop, it could be wise to invest in quality internet stocks Wix.com Ltd. (WIX) and Perion Network Ltd. (PERI).
The Department of Commerce’s National Telecommunications and Information Administration (NTIA) announced today that it has granted 28 grants totaling $74.42 million to 28 Tribal entities as part of the Tribal Broadband Connectivity Program (TBCP).
With funding from the Bipartisan Infrastructure law, these new grants boost the program’s total award to 226 Tribal entities more than $1.86 billion. Record investments in high-speed Internet deployment are a crucial component of President Biden’s Investing in America agenda.
The global internet service market is expected to grow at a CAGR of 8.2% until 2030. The market is constantly expanding, with key players increasingly adopting emerging technologies.
Investors’ interest in internet stocks is evident from the Invesco NASDAQ Internet ETF’s (PNQI) 7.1% gains over the past six months.
With these favorable trends in mind, let’s delve into the fundamentals of top two Internet – Services stocks, beginning with number 2.
Stock #2: Wix.com Ltd. (WIX)
Headquartered in Tel Aviv, Israel, WIX develops and markets a cloud-based platform for creating websites and web applications. Its offerings include a visual development platform for customized website creation. The company also provides vertical-specific applications and complementary services like App Market and owner App for website management.
On October 3, 2023, WIX and Intuit Mailchimp (INTU), the globe’s leading email marketing and automation #1, announced a multi-year strategic collaboration. Users will benefit from stronger functionality and convenience of use of marketing operations as a result of the planned collaboration between the platforms by connecting CRM data between the platforms, enhancing their marketing capabilities to drive customer engagement and increase sales growth.
On September 12, 2023, WIX announced Tap to Pay on Android, expanding its partnership with Stripe to allow U.S.-based merchants utilizing WIX for eCommerce, reservations, and events solutions to accept safe, contactless payments straight from their Android handsets without the need for additional hardware. This collaboration streamlines in-person commerce and improves the checkout experience for WIX merchants.
WIX’s trailing-12-month CAPEX / Sales of 4.87% is 101.4% higher than the industry average of 2.42%. Its trailing-12-month asset turnover ratio of 0.81x is 30.3% higher than the industry average of 0.62x.
For the second quarter ended June 30, 2023, WIX’s total revenue increased 13% year-over-year to $389.98 million. Its non-GAAP operating income came in at $68.86 million, compared to a non-GAAP operating loss of $12.93 million in the year-ago period.
In addition, its non-GAAP net income came in at $78.09 million, compared to a non-GAAP net loss of $7.83 million in the prior-year quarter. Also, its non-GAAP EPS came in at $1.26, compared to a non-GAAP loss per share of $0.14 in the year-ago quarter.
Analysts expect WIX’s revenue to increase 12.2% year-over-year to $1.56 billion for the year ending December 2023. Its EPS is expected to come in at $3.44 for the same period. Shares of WIX has 15.9% over the past nine months to close the last trading session at $87.50.
WIX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
WIX also has an A grade for Growth and a B for Quality. It is ranked #4 out of 27 stocks in the Internet – Services industry. Click here for the additional POWR Ratings for Value, Momentum, Stability, and Sentiment for WIX.
Stock #1: Perion Network Ltd. (PERI)
Headquartered in Holon, Israel, PERI provides digital advertising solutions to brands, agencies, and publishers in North America, Europe, and internationally. It provides Wildfire, a content monetization platform; search monetization solutions, including website monetization, search mediation, and app monetization; and cross-channel digital advertising software as a service platform.
On September 6, 2023, PERI announced that its AI-based technology, SORT, won the ‘Best Cookieless Identification Technology’ category at the 2023 Digiday Technology Awards. SORT was honored for its involvement in a successful digital campaign for Mercedes-Benz USA, attaining strong privacy standards and a 70% increase in brand interactions.
PERI’s trailing-12-month ROCE of 19.14% is 338.1% higher than the 4.37% industry average. Its trailing-12-month net income margin of 15.82% is 338.9% higher than the 3.60% industry average.
PERI’s total revenues for the second quarter ended June 30, 2023, increased 21.7% year-over-year to $178.50 million. Its non-GAAP net income increased 71.8% year-over-year to $42.10 million. Its adjusted EBITDA rose 44.6% year-over-year to $41.2 million. Also, its non-GAAP EPS came in at $0.84, representing an increase of 64.7% year-over-year.
The consensus revenue estimate of 740.99 million for the year ending December 2023 represents a 15.7% increase year-over-year. Its EPS is expected to grow 15.4% year-over-year to $2.38 for the same period. It surpassed EPS estimates in all four trailing quarters. PERI’s shares have gained 49% over the past year to close the last trading session at $30.09.
PERI’s overall B rating equates to a Buy in our POWR Ratings system. It also has a B grade for Value and Quality.
It is ranked #3 in the same industry. Beyond what is stated above, we’ve also rated PERI for Momentum, Sentiment, Stability, and Growth. Get all PERI ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
2024 Stock Market Outlook >
WIX shares were trading at $87.63 per share on Wednesday morning, up $0.13 (+0.15%). Year-to-date, WIX has gained 14.06%, versus a 11.69% 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. More…