Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. This influence cuts both ways though because they have high exposure to the ups and downs of consumer spending, and uncertainty surrounding this factor has capped the industry’s returns - over the past six months, its 10.1% gain has lagged the S&P 500 by 6.2 percentage points.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here is one resilient internet stock at the top of our wish list and two that may face trouble.
Two Consumer Internet Stocks to Sell:
Etsy (ETSY)
Market Cap: $6.69 billion
Founded by a struggling amateur furniture maker Robert Kalin and his two friends, Etsy (NYSE:ETSY) is one of the world’s largest online marketplaces, focusing on handmade or vintage items.
Why Does ETSY Worry Us?
- Intense competition is diverting traffic from its platform as its active buyers fell by 2.1% annually
- Lackluster growth in its average revenue per buyer coupled with its weaker engagement trends led to sluggish demand over the last two years
- Earnings per share lagged its peers over the last three years as they only grew by 1.4% annually
At $73.10 per share, Etsy trades at 12.1x forward EV/EBITDA. To fully understand why you should be careful with ETSY, check out our full research report (it’s free).
Expedia (EXPE)
Market Cap: $31.53 billion
Originally founded as a part of Microsoft, Expedia (NASDAQ:EXPE) is one of the world’s leading online travel agencies.
Why Does EXPE Give Us Pause?
- Platform monetization efforts took a back seat over the last two years as it focused on growing its bookings
- Estimated sales growth of 6.4% for the next 12 months implies demand will slow from its three-year trend
- High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum
Expedia is trading at $262.95 per share, or 7.1x forward EV/EBITDA. If you’re considering EXPE for your portfolio, see our FREE research report to learn more.
One Consumer Internet Stock to Watch:
LegalZoom (LZ)
Market Cap: $981.3 million
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ:LZ) offers online legal services and documentation assistance for individuals and businesses.
Why Could LZ Be a Winner?
- Subscription Units have increased by an average of 10.7% annually, giving it the potential for margin-accretive growth if it can develop valuable complementary products and features
- Platform’s growing usage and its ability to increase user spending by 17.2% annually showcases its high switching costs
- Highly efficient business model is illustrated by its impressive 23.1% EBITDA margin, and its profits increased over the last few years as it scaled
LegalZoom’s stock price of $5.74 implies a valuation ratio of 4x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.