The Internet industry is well-positioned for long-term growth, with more people and businesses using digital services after the pandemic. Internet companies offer enhanced services to businesses and consumers amid growing demand for digital solutions.
In this piece, I have discussed the reasons why I think internet stocks LegalZoom.com, Inc. (LZ – Get Rating), Solo Brands, Inc. (DTC – Get Rating), and trivago N.V. (TRVG – Get Rating) are performing better than Netflix, Inc. (NFLX – Get Rating) and could be wise to buy these stocks.
At the beginning of the third quarter in 2023, about 5.19 billion people worldwide were using the internet, which is 64.4% of the global population. Additionally, global 5G connections are on track to exceed 1.90 billion by year-end, with forecasts projecting around 6.80 billion 5G connections by the end of 2027.
In the second quarter, NFLX’s EPS came 15.2% above analyst estimates, while its revenue missed the consensus estimate by 1.2%. Its revenue for the second quarter ended June 30, 2023, rose 2.7% year-over-year to $8.19 billion. Its net income increased 3.2% over the prior-year quarter to $1.49 billion. Also, its EPS came in at $3.29, representing an increase of 2.8% year-over-year.
The company is facing tough competition in the video streaming industry. More companies are entering the market, and Netflix’s dominant position is being challenged.
Amid the competitive streaming market, NFLX is trying to cut costs and boost engagement. The company’s subscriptions rose 8% in the second quarter. Amid its crackdown on password sharing in the U.S., the company added 5.89 million customers during the second quarter.
The streaming giant guided for a third-quarter revenue of $8.52 billion, but it was below analyst expectations of $8.67 billion. The company expects a revenue boost in the second half of the year driven by its ad-supported plan and paid sharing.
NFLX is also trading at an expensive valuation. In terms of forward EV/EBITDA, NLFX’s 27.74x is 232.1% higher than the 8.35x industry average. Likewise, its 6.09x forward EV/Sales is 216.9% higher than the 1.92x industry average.
Although analysts expect a 7.7% and 12.9% year-over-year increase in revenue and EPS for NFLX in the third quarter, it’s noteworthy that the company has disappointed by failing to top revenue estimates in three of the four trailing quarters.
NFLX remains confident of growing its topline this year through its new initiatives. However, with NFLX trading at an expensive valuation and the breakdown of…
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