The Internet sector is expected to grow steadily due to increasing digitization and government initiatives to make the Internet accessible to all. The increased demand for online services and e-commerce platforms also contributes to the growth of the internet industry.
Therefore, it may be wise to own fundamentally strong Internet stocks Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOGL), and Meta Platforms, Inc. (META).
The Commerce Department’s National Telecommunications and Information Administration (NTIA) announced today that it has awarded 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 act, these new grants increase the program’s total allocation to 226 stem units by more than $1.86 billion. Record investments in high-speed Internet are a critical part of President Biden’s Investing in America agenda.
According to Data Bridge Market Research, the market for broadband Internet access services will be worth $614.26 million by 2030, with a CAGR of 7.2%. The global increase in wireless users is driven by digital transformation and increasing online education in businesses that require continuous broadband connectivity.
Investor interest in Internet stocks is evidenced by the Invesco NASDAQ Internet ETF’s ( PNQI ) gains of 19.9% over the past nine months.
With these favorable trends in mind, let’s take a look at the fundamentals of the top three Internet stocks, starting with #3.
Stock #3: Amazon.com, Inc. (AMZN)
AMZN engages in the retail sales of consumer products and subscriptions through online and brick-and-mortar stores in North America and internationally. It operates through three segments: North America; International; and Amazon Web Services (AWS).
AMZN’s trailing 12-month EBITDA margin of 13.35% is 21% higher than the industry average of 11.04%. Its trailing 12-month leveraged FCF margin of 6.57% is 27.5% higher than the industry average of 5.15%.
For the third quarter ended September 30, 2023, AMZN’s net sales increased 12.6% year-over-year to $143.08 billion. Its operating income grew 343.1% from the previous year to $11.19 billion. The company’s net profit rose 244% year over year to $9.88 billion. Additionally, the company’s earnings per share came in at $0.94, up 235.7% year-over-year.
Analysts expect AMZN’s revenue to increase 11.1% year-over-year to $570.77 billion for the year ending December 2023. Its earnings per share are expected to come in at $2.66 for the same period. It beat EPS estimates in three out of four subsequent quarters. Shares of AMZN have surged 43.3% over the past nine months to close the most recent trading session at $142.59.
AMZN’s POWR rating reflects this promising outlook. The share has an overall rating of B, which corresponds to a buy in our proprietary rating system. POWR Ratings rates stocks based on 118 different factors, each with its own weighting.
AMZN is also rated A for sentiment and a B for growth, momentum and quality. It is ranked number 16 out of 58 stocks in the internet industry. Click here for additional POWR Value and Stability Ratings for AMZN.
Stock #2: Alphabet Inc. (GOOGLE)
GOOGL offers various products and platforms internationally. It works through the Google Services, Google Cloud and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, hardware, Gmail, Google Drive, Google Maps, etc. The Google Cloud segment offers infrastructure, cybersecurity, data, etc. The Other Bets segment sells health technology and internet services.
GOOGL’s trailing 12-month net income margin of 22.46% is 674.9% higher than the industry average of 2.90%. Its trailing 12-month ROCE of 25.33% is 671.6%% higher than the industry average of 3.28%.
For the fiscal third quarter ended September 30, 2023, GOOGL’s revenue increased 11% year-over-year to $76.69 billion. The company’s operating income rose 24.6% year over year to $21.34 billion. Additionally, net income increased 41.5% year-over-year to $19.69 billion. Additionally, its earnings per share landed at $1.55, representing a 46.2% year-over-year increase.
The Street expects GOOGL’s revenue to rise 8.1% year-over-year to $305.69 billion for the year ending December 2023. Its earnings per share are expected to grow 26% year-over-year to $5.74 for same period. It beat EPS estimates in all four subsequent quarters. The stock rose 39.6% over the past nine months to close the most recent trading session at $132.09.
It’s no surprise that GOOGL has an overall B rating, which equates to a buy in our POWR rating system. It has B ratings for sentiment and quality. It is ranked #3 in the same industry.
In addition to what is listed above, we have also rated GOOGL for growth, value, momentum and stability. Get all GOOGL ratings here.
Stock #1: Meta Platforms, Inc. (META)
META is committed to the development of products that enable people to connect and share with friends and family via mobile devices, personal computers, virtual reality headsets and wearable devices worldwide. It operates in two segments, Family of Apps and Reality Labs.
META’s trailing 12-month ROTA of 13.75% is significantly higher than the industry average of 1.15%. Its trailing 12-month net income margin of 23.42% is 708.1% higher than the industry average of 2.90%.
META’s revenue for the third quarter ended September 30, 2023 increased 23.2% year-over-year to $34.15 billion. The company’s revenue from operations increased 142.7% year-over-year to $13.75 billion. Its net profit rose 163.5% year-on-year to $11.58 billion. Additionally, its earnings per share came in at $4.39, representing a 167.7% year-over-year increase.
The consensus revenue estimate of $133.24 billion for the year ending December 2023 represents a 14.3% year-over-year increase. Its earnings per share are expected to grow 66.4% year over year to $14.29 for the same period. It beat EPS estimates in three out of four subsequent quarters. META’s shares have surged 191.3% over the past year to close the last trading session at $329.19.
META’s strong fundamentals are reflected in its POWR rating. The share has an overall rating of A, which corresponds to a strong buy in our proprietary rating system.
It is ranked #2 in the same industry. It is rated A for quality and a B for sentiment and growth. To see additional META ratings for value, momentum and stability, click here.
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GOOGL stock was trading at $134.70 per share on Tuesday morning, up $2.61 (+1.98%). Year to date, GOOGL is up 52.67%, compared with an 18.72% gain in the benchmark S&P 500 over 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 strives to make complex financial matters comprehensible to individual investors and help them make appropriate investment decisions. More…
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