2 Internet Stocks That Are Better Buys Than Netflix Right Now
Streaming giant Netflix, Inc. (NFLX) recorded $7.93 billion in total revenues, up 5.9% year-over-year for the third quarter that ended September 30, 2022. However, its EPS came in at $3.10, down 2.8% year-over-year.
Moreover, analysts expect NFLX's EPS to decline 8.2% year-over-year to $10.32 in 2022. Also, the stock is significantly overvalued. Its forward EV/Sales of 4.29x is 129.1% higher than the industry average of 1.87x, while its forward Price/Sales of 3.96x is 217.9% higher than the industry average of 1.25x.
However, in today's globalized world, the internet has emerged as one of the most important resources for information, entertainment, and communication. Moreover, the internet service market is projected to grow at a CAGR of 9.6% by 2031.
Thus, investors looking to benefit from the sound prospects of the industry could consider buying quality internet stocks Yelp Inc. (YELP) and trivago N.V. (TRVG) instead of NFLX.
Yelp Inc. (YELP)
YELP operates a platform that connects consumers with local businesses in the United States and internationally. The company's platform covers various regional business categories. It also offers free and paid advertising products to businesses.
In terms of forward EV/EBITDA, YELP is currently trading at 6.48x, 22.9% lower than the industry average of 8.40x. Its forward EV/Sales multiple of 1.46 is 22% lower than the industry average of 1.87.
YELP's trailing-12-month gross profit margin of 91.25% is 81.4% higher than the 50.32% industry average. Its trailing-12-month levered FCF margin of 17.20% is 117.6% higher than the 7.90% industry average.
YELP's gross profit came in at $308.89 million for the third quarter that ended September 30, 2022, up 14.8% year-over-year. Its adjusted EBITDA came in at $73.94 million, up 4.6% year-over-year.
Street expects YELP's revenue to increase 15.5% year-over-year to $1.19 billion in 2022. Its EPS is estimated to grow 8% year-over-year to $0.54 in 2022. It surpassed EPS estimates in three of four trailing quarters. YELP's shares have gained marginally intraday to close the last trading session at $29.62.
YELP has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Value. Within the Internet industry, it is ranked #3 out of 59 stocks. Click here for the additional POWR Ratings for YELP (Growth, Stability, Sentiment, and Momentum).
trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates a hotel and accommodation search platform globally. The company offers an online meta-search for hotels and accommodations through online travel agencies, hotel chains, and independent hotels.
On October 18, 2022, TRVG and AXS, a digital ticketing platform for live sports and entertainment, announced a global partnership to allow eventgoers to access affordable stay booking options with event ticket purchases made via AXS. This partnership could be strategically beneficial for both companies.
In terms of forward EV/EBITDA, TRVG is trading at 2.13x, 74.7% lower than the industry average of 8.40x. Its forward E.V./Sales multiple of 0.41 is 78% lower than the industry average of 1.87.
TRVG's trailing-12-month gross profit margin of 97.69% is 94.1% higher than the 50.32% industry average. Its trailing-12-month levered FCF margin of 13.64% is 72.5% higher than the 7.90% industry average.
TRVG's net sales came in at €183.70 million ($190.38 million) for the third quarter that ended October 30, 2022, up 33% year-over-year. Also, its Americans segment's revenue came in at €75.2 million ($77.90 million), up 56.3% year-over-year. Moreover, its adjusted EBITDA rose 116% year-over-year to €33.50 million ($34.72 million).
TRVG's revenue is expected to increase by 52.3% year-over-year to $561.18 million in 2022. Over the past month, the stock has gained 38.4% to close the last trading session at $1.34.
TRVG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
TRVG has an A grade for Quality and a B for Value and Growth. It is ranked first in the same industry. We have also rated TRVG for Stability, Sentiment, and Momentum. Get all TRVG ratings here.
YELP shares were trading at $30.47 per share on Wednesday afternoon, up $0.85 (+2.87%). Year-to-date, YELP has declined -15.92%, versus a -14.22% rise in the benchmark S&P 500 index during the same period.