The persistent wave of digitalization and the presence of smartphones continue to drive substantial growth in internet usage. Additionally, the internet industry’s outlook is strengthened by the swift adoption of Artificial Intelligence (AI) and the widespread expansion of 5G connectivity.
Against the backdrop, in this article, I have evaluated the fundamentals of three robust internet stocks, Booking Holdings Inc. (BKNG – Get Rating), Fiverr International Ltd. (FVRR – Get Rating), and Expedia Group, Inc. (EXPE – Get Rating), which could be better buys than Amazon.com, Inc. (AMZN – Get Rating).
AMZN, the global e-commerce and technology behemoth that reshaped the retail landscape, recently announced its fiscal second-quarter results, exceeding analysts’ expectations. However, the company seems to exhibit a stretched valuation and has comparatively lower profitability when benchmarked against its industry peers.
For instance, in terms of forward non-GAAP P/E, AMZN is trading at 65.84x, 354.9% higher than the industry average of 14.47x. The stock’s forward EV/Sales of 2.78x is 144.3% higher than the 1.14x industry average. Furthermore, the stock’s forward Price/Sales ratio of 2.59x is 205.6% higher than the 0.85x industry average.
On the profitability side, AMZN’s trailing-12-month net income margin of 2.43% is 43.9% lower than the 4.33% industry average. Likewise, its trailing-12-month EBIT margin of 3.29% is 54.8% lower than the industry average of 7.28%.
On the other hand, the internet industry’s outlook is brightened by widespread internet usage and the growing number of 5G connections worldwide. At the beginning of the third quarter of 2023, around 5.19 billion people across the globe were using the internet, constituting 64.5% of the total global population.
Furthermore, the global 5G connections are set to exceed 1.90 billion by the end of this year. This projection outlines an impressive trajectory, with forecasts indicating 6.80 billion global 5G connections by the conclusion of 2027. This indicates an annual average growth of nearly one billion new connections, underscoring the significant scope and impact of the 5G technology landscape.
Considering these factors…
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