As the Federal Reserve is fighting sky-high inflation with its aggressive rate hikes, the capital-intensive tech sector has witnessed a massive selloff due to investors’ concerns over their rising borrowing costs. This has led to the tech-heavy Nasdaq composite losing 34.8% year-to-date.
Multinational conglomerate Alphabet Inc. (GOOGL) has registered weak momentum over the past months. The stock has lost 39.7% year-to-date and 41.4% over the past year to close the last trading session at $87.32.
Moreover, the company reported its third-quarter revenue of $69 billion, up 6% from last year but lower than analysts’ estimates of $70.90 billion. On top of it, as advertising spending tends to slow during economic downturns, GOOGL’s disappointing earnings show it is not immune to such challenges.
Additionally, like many tech and social media firms, GOOGL is struggling to compete with TikTok amid a broader economic downturn.
On the other hand, internet adoption has flourished in the recent past. With about 5 billion people using the internet, the global internet penetration rate stands at about 63% in 2022. The number of devices connected to the internet is expected to hit 500 billion by 2030.
Expedia Group, Inc. (EXPE)
EXPE is an online travel company operating through Retail; B2B; and trivago segments. The company’s brand portfolio includes Brand Expedia, Hotels.com, Vrbo, Hotwire, and CarRentals.com.
On June 30, EXPE announced a collaboration with the loyalty program Bilt Rewards to launch the new Bilt Travel Portal. Christian Gerron, senior vice president of Media & Brand Partnerships, EXPE, said, “Our innovative solutions provide Bilt Rewards with technology they need to build a wonderful experience and offer an unparalleled amount of travel options to their members.”
EXPE’s forward non-GAAP PEG multiple of 0.69 is 43.6% below the industry average of 1.23. In terms of its forward non-GAAP EV/EBITDA, the stock is currently trading at 6.84x, 20.9% below the industry average of 8.65x.
EXPE’s revenues increased 22.2% year-over-year to $3.62 billion in the third quarter ended September 30. Its adjusted EBITDA grew 26.2% from the year-ago value to $1.08 billion. The company’s adjusted net income rose 15.7% year-over-year to $640 million, while its adjusted EPS grew 14.7% from its prior-year quarter to $4.05.
Analysts expect EXPE’s revenue for the current fiscal year ending December 2022 to come in at $11.74 billion, representing a 36.5% rise year-over-year. Similarly, the company’s EPS for the same year is expected to come in at $7.20, representing a growth of 336.7% year-over-year.
EXPE has gained 1.7% over the past five days to close its last trading session at $89.06.
EXPE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
EXPE has a B grade for Quality and Value. It is ranked #6 out of 59 stocks in the Internet industry.
Beyond what we’ve stated above, we have also given EXPE grades for Momentum, Stability, and Sentiment. Get all the EXPE ratings here.
Yelp Inc. (YELP)
YELP operates a platform that connects consumers with local businesses internationally. The company’s platform covers various local business categories and provides free and paid advertising products to businesses.
In terms of its forward non-GAAP PEG, YELP is currently trading at 0.44x, 61.6% lower than the industry average of 1.15x. Its forward EV/Sales multiple of 1.50 is 18.4% lower than the industry average of 1.84.
YELP’s net revenue increased 14.8% year-over-year to $308.89 million for the third quarter that ended September 30, 2022. Its advertising revenue rose 14.3% year-over-year to $293.66 million, while its adjusted EBITDA came in at $73.94 million, up 4.6% year-over-year.
The consensus EPS estimate of $0.59 for the first fiscal quarter ending March 2023 indicates a 336.8% improvement year-over-year. The consensus revenue estimate of $305.48 million for the same quarter represents a 10.4% increase from the same period last year.
The stock has declined 1.5% over the past six months to close its last trading session at $29.08.
YELP has an overall rating of B, which translates to Buy in our proprietary rating system. It is rated an A in Quality and a B in Value. Within the same industry, YELP is ranked #3.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for YELP, click here.
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EXPE shares were trading at $98.74 per share on Thursday afternoon, up $9.68 (+10.87%). Year-to-date, EXPE has declined -45.36%, versus a -16.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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