3 Internet Stocks Worth Watching

With digitization gaining momentum worldwide, the rising internet penetration and supportive government initiatives to make the internet accessible to everyone provide ample growth opportunities to companies providing internet services. Hence, fundamentally sound internet stocks Amazon (AMZN), Pinterest (PINS), and Data Storage (DTST) could be ideal additions to your watchlist. Continue reading….

Amid rapid digital transformation globally, the growing internet penetration positions the internet services sector to grow and expand significantly. Internet services are applied for education, retail, financial services, healthcare, telecom and IT, manufacturing, and transportation by enterprises, individuals, and government institutions.

Further, the government’s initiatives to provide affordable, reliable, high-speed internet to everyone nationwide should boost the sector’s prospects. Amid this backdrop, quality internet stocks Amazon.com, Inc. (AMZN), Pinterest, Inc. (PINS), and Data Storage Corporation (DTST) could be worth watching now.

Before diving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the internet industry’s prospects.

When the COVID-19 pandemic broke out, much of the world moved online, accelerating digital transformation and technologies by several years. The pandemic fundamentally changed how we work, connect, learn, and shop. With the global economy digitalizing rapidly, businesses and individuals increasingly rely on high-speed internet services.

According to Statista, as of 2023, nearly 92% of individuals in the U.S. accessed the internet, an increase of approximately 77% in 2022. The U.S. is one of the biggest online markets globally, with around 299 million internet users as of last year.

With the growing internet penetration, there is a significant rise in online spending. The global e-commerce market is expected to reach $70.90 trillion by 2028, exhibiting a growth rate of 27.4% during 2023-2028. Increasing online shopping activities and the rising availability of several mobile applications for purchasing a diverse range of products are key factors driving the market.

Moreover, the government is stepping up with many initiatives to make the internet accessible to everyone. For instance, the Broadband Equity, Access, and Deployment (BEAD) Program allocates $42.54 billion from President Biden’s Bipartisan Infrastructure law to expand high-speed internet access by funding planning, infrastructure deployment, and adoption programs nationwide.

The growing adoption of new technologies such as 5G should further propel the expansion of the internet industry. The private 5G network deployments are rapidly increasing as enterprises continue digitizing their operations to boost automation and enhance data security. As per GSMA, 5G networks are expected to cover one-third of the world population by 2025.

According to ReportLinker, the global wireless internet services market is projected to grow to $921.97 billion in 2027 at a CAGR of 7%.

Meanwhile, investors’ interest in internet stocks is evident from the First Trust Dow Jones Internet Index Fund’s (FDN) more than 22% returns over the past six months.

Given the industry tailwinds, it’s time to examine the fundamentals of the top three stocks to watch in the Internet industry, starting with the third in line.

Stock #3: Pinterest, Inc. (PINS)

PINS is a visual discovery engine that operates in the United States and internationally. The company’s engine enables people to find ideas like recipes, home, and style inspiration; offers video, product, and idea pins; and provides organizing and planning tools. It shows organic recommendations and an advertising engine based on pinners’ tastes and preferences.

On June 15, PINS and Westbrook Inc., an entertainment and media company, partnered to launch innovative branded content series for Halloween and the winter holiday season. The media company would produce branded content across Pinterest, including the platform’s new Pinterest Premiere Spotlight ad solution, to connect with prospective shoppers in an engaging format.

With Westbrook’s proven track record for creating engaging content with brands, this partnership should bode well for PINS.

For the second quarter that ended June 30, 2023, PINS’ revenues increased 6.3% year-over-year to $708.03 million. Its adjusted EBITDA grew 16.3% from the year-ago value to $107.02 million. Also, the company’s non-GAAP net income and non-GAAP net income per share came in at $142.09 million and $0.21, increases of 83.7% and 90.9% year-over-year, respectively.

Analysts expect PINS’ revenue for the fiscal year (ending December 2023) to increase 7.9% year-over-year to $3.02 billion. The consensus EPS estimate of $0.94 for the current year indicates an improvement of 52.2% year-over-year. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters,…