Internet stocks are riding on the massive demand for digital transformation and cloud-computing services, courtesy of the work-from-home, online learning and remote health diagnostic trends.
The significance of the Internet amid the pandemic cannot be underestimated as it emerged as a beacon of light helping people cope with the new normal. Economies globally are enduring the ordeal with the help of services such as video conferencing, gaming and online learning, to name a few.
The confidence surrounding Internet stocks can be ascertained by the robust performance of Invesco NASDAQ Internet ETF (PNQI), which has rallied 57.7% on a year-to-date basis compared with the SPDR S&P 500 ETF’s (SPY) gain of 14%.
Notable Factors to Boost Internet Stocks Through 2021
The optimism stemming from vaccine approvals has bolstered confidence no doubt. But, until and unless vaccines are democratized, the practice of social distancing is here to stay.
In a bid to contain the virus spread, the usage of Internet-of-Things-based services, robotics, e-commerce, social media platforms, contactless payment and online delivery solutions has increased worldwide.
Demand for SaaS-based (or Software as a Service) applications pertaining to employee collaboration, telehealth care, cybersecurity, infrastructure monitoring, asset performance management and human capital management solutions, amid accelerated deployment of 5G, remains significantly high.
Additionally, the stay-at-home wave has increased user engagement across social media platforms as well as online gaming, music and video streaming services.
Also, the reopening of theaters, parks and event spaces following the easing of lockdowns is anticipated to cause a strong 20.7% rebound in entertainment digital ad spending to $8.48 billion in 2021, per eMarketer data.
Moreover, per another eMarketer update, increasing investments in mobile, video ads, connected TV (CTV) and programmatic transactions are expected to facilitate a recovery in 2021, with U.S. programmatic digital display spending set to hit $79.61 billion.
Given the promising backdrop, we zero in on six Internet-focused stocks that are well-poised to grow in 2021.
Apart from strong fundamentals, each of these stocks has a favorable combination of a Growth Score of A or B, and a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Markedly, growth investors are primarily focused on stocks with aggressive earnings or revenue growth, which should boost their stock price in the future
By concentrating on Zacks Rank #1 or 2 stocks, growth investors can easily screen for companies, utilizing the Zacks Stock Screener, exhibiting these stellar growth rates and their likelihood of continuing. Per the Zacks proprietary methodology, stocks with these favorable combinations offer good investment opportunities.
Notably, each of the six companies have seen positive earnings revisions for both the current and the next fiscal year in the past 30 days.
The Trade Desk TTD is poised to gain from a projected solid uptick in programmatic ad buying in 2021. Moreover, the growing clout of digital content is bolstering the utilization of its inventory across all forms of CTV.
Further, a recovery in ad demand on an improving spending scenario is expected to drive the top line for this Zacks Rank #1 company.
The company has a Growth Score of B. The Zacks Consensus Estimate for its 2020 earnings is pegged at $4.23 per share, which has been revised 44.9% upward in the past 30 days. For 2021, the consensus mark for earnings has moved up 18.8% to $4.49 per share over the same time frame.
NIC Inc. EGOV is benefiting from the growing clout of digital government services aimed at enabling governments to leverage the Internet to reduce costs and offer advanced services to businesses and citizens.
Moreover, product-mix shift to SaaS and new contract wins across the States of Iowa and Florida, remain the key catalysts. Further, the company is benefiting from the continued momentum in COVID-19 testing partnerships.
This Zacks Rank #1 company has a Growth Score of B. The Zacks Consensus Estimate for its 2020 earnings is pegged at $1.02 per share, having been revised 1% upward in the past 30 days. For 2021, the consensus mark for earnings has moved up 3% to $1.03 per share over the same time frame.
Dropbox DBX has been gaining from the evolving workspace demand for seamless enterprise communication tools.
The company offers a platform that enables users to store and share files, photos, videos, songs and spreadsheets. Solid demand for cloud storage, triggered by the coronavirus-led work-from-home wave, has been acting as a tailwind for this Zacks Rank #2 company.
Further, integration with leading applications like Zoom Video, Slack and Atlassian is likely to expand the Dropbox paying-user base over the long run.
Dropbox has a Growth Score of A. The Zacks Consensus Estimate for its 2020 earnings is pegged at 88 cents per share, having been revised upward by 14.3% in the past 30 days. For 2021, the consensus mark for earnings has moved up 9.9% to $1.00 per share over the same time frame.
Digital Turbine APPS is benefiting from robust demand for its cloud-based mobile software offerings as enterprises continued the shift from on-premise to cloud environments, especially amid the coronavirus-led lockdown.
Prospects appear bright, given a diversified partner base, a large content business partner and rollouts with newer international partners, which are expected to drive the top line.
This Zacks Rank #2 company has a Growth Score of A. The Zacks Consensus Estimate for its fiscal 2021 earnings has risen 1.6% to 63 cents per share in the past 30 days. Over the same timeframe, the consensus mark for fiscal 2022 earnings has climbed 7.5% to 86 cents per share.
Shopify SHOP is riding on an exponential surge in buying of essential items due to COVID-19-induced lockdowns and shelter-in-place guidelines. Moreover, the robust performance of Shopify Shipping, Shopify Payments and Shopify Capital is a key catalyst for this Zacks Rank #2 company.
Furthermore, the strong uptake of new merchant-friendly applications amid an evolving retail environment and an e-commerce boom bodes well. Also, partnerships with Walmart and Facebook are expected to expand the merchant base. Initiatives aimed at international expansion remain noteworthy.
Shopify recently announced that brands on its platform hit $5.1 billion in sales on Black Friday/Cyber Monday 2020 weekend, up 76% year over year. Shopify platform had generated sales of $2.4 billion alone on Black Friday.
The company has a Growth Score of B. The Zacks Consensus Estimate for 2020 earnings has moved upward by 1.6% to $2.51 per share in the past 30 days. For 2021, the consensus mark for earnings has moved up 4.3% to $2.45 per share over the same time frame.
Wayfair W is witnessing strong acceleration in new and repeat customer orders. Also, an expanding active customer base and strength in the company's direct retail business are positives.
The stay-at-home wave is encouraging expenditure on upgrading living spaces. This holds promise for this Zacks Rank #2 company, which engages in the e-commerce business, offering furniture, décor, decorative accents, housewares, seasonal décor, and other home goods.
Moreover, the company is aggressively investing in international regions in order to bolster presence and expand in-house-brand offerings.
Wayfair has a Growth Score of B. The Zacks Consensus Estimate for its 2020 bottom line is pegged at $4.36 per share, having revised upward by 61.5% in the past 30 days. For 2021, the consensus mark for earnings has moved up 79.7% to $2.21 per share over the same timeframe.
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