Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. Luckily for them, the market seems to believe there is still a long runway for growth as the industry has recorded a 25.5% gain over the past six months, beating the S&P 500 by 15.7 percentage points.
Nevertheless, investors should tread carefully as many internet companies pursue winner-take-all strategies, meaning losses can be catastrophic if their playbooks don’t pan out. Keeping that in mind, here are three consumer internet stocks boasting durable advantages.
Meta (META)
Market Cap: $1.52 trillion
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ:META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Why Is META a Good Business?
People are spending more money on its platform as its average revenue per user has increased by 8.8% annually
Disciplined cost controls and effective management result in a strong two-year EBITDA margin of 56.9%, and its profits increased over the last four years as it scaled
Robust free cash flow margin of 31.8% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
Meta is trading at $602.40 per share, or 14.5x forward EV-to-EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
MercadoLibre (MELI)
Market Cap: $87.85 billion
Originally started as an online auction platform, MercadoLibre (NASDAQ:MELI) is a one-stop e-commerce marketplace and fintech platform in Latin America.
Why Are We Backing MELI?
Unique active users have grown by 17.4% annually, allowing it to expand profitably if it can build complementary products and cross-sell them to its audience
Platform’s growing usage and its ability to increase user spending by 20% annually showcases its high switching costs
MELI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its recently improved profitability means it has even more resources to invest or distribute
At $1,740 per share, MercadoLibre trades at 20.5x forward EV-to-EBITDA. Is now a good time to buy? See for yourself in our full research report, it’s free.
Robinhood (HOOD)
Market Cap: $35.69 billion
With a mission to democratize finance, Robinhood (NASDAQ:HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
Why Should You Buy HOOD?
Customer spending is rising as the company has focused on monetization over the last two years, leading to 31.4% annual growth in its average revenue per user
Incremental sales over the last three years have been highly profitable as its earnings per share increased by 28.3% annually, topping its revenue gains
Strong free cash flow margin of 61% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy
Robinhood’s stock price of $40.41 implies a valuation ratio of 33.2x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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