The 1990s and the early 2000s gave the world an unprecedented change through the rise of what we call the Internet. Web 1.0 was ushered in when web browsers such as Netscape Navigator were introduced. The bland and disorganized web pages of this era were replaced by the era of social media and user-generated content. Over the past decade, the world saw an exponential rise of Web 2.0, which is characterized by the continuous rise of a handful of dominant platforms.
The upcoming iteration of these generational phases is what we understand as Web 3.0. This new version of the web is built upon the principles of decentralization, openness, and greater user utility. Integrating technologies such as Artificial Intelligence and Machine Learning, or the semantic web system, the concept of Web 3.0 is picking up momentum.
Given this backdrop, today I am going to analyze prominent companies that are well-positioned to benefit from the new generation of Internet: International Business Machines Corporation (IBM), Microsoft Corporation (MSFT), and Intel Corporation (INTC).
What is Web 3.0?
Web 3.0 refers to the next big evolution of the world wide web (www). The new Internet provides a semantic web system where users will experience a more intelligent and connected web. While the earlier Internet generations could not fully cater to individual needs, Web 3.0 promises to be more dynamic and interactive.
So far, in web 2.0, users have not benefited from their data being monitored or even sold. However, web 3.0 is built on the user control of their data and its monetization. This third-generation Internet is supposed to be an opt-in system where users will enjoy customization of their personal preferences. A shift in public opinion can be noticed regarding data usage, which might revolutionize the internet ecosystem.
Web 3.0 is based on the tenet of decentralization, with blockchain at the core of its foundation. A blockchain is a public ledger of activity of the cryptocurrency network, such as bitcoin. Web 3.0 advocates believe that cryptocurrencies will be operative in the Internet’s future—for example, a web application functions on a particular blockchain that uses a specific coin. The global Web 3.0 blockchain market is expected to grow at a CAGR of 44.6% between 2022 to 2030.
Performance of Major Industry Participants
With a market capitalization of $2.73 trillion, Apple Inc. (AAPL) has gained 24.2% over the past year, broadly outpacing the S&P 500’s gains of 7.2% over the same period. AAPL is expected to operate in the web 3.0 infrastructural field. Chipmaker Advanced Micro Devices, Inc. (AMD), with a market capitalization of $157.74 billion, is expected to power the revolution through its AI Graphics chips. AMD has gained 19.5% over the past year.
Another frontrunner expected to be central in the web 3.0 advancement is the semiconductor giant NVIDIA Corporation (NVDA). NVDA has a $553.17 billion market capitalization and has gained 44.5% over the past year.
Best Web 3.0 Stocks to Buy Now
Web 3.0 is a loose concept at the moment but is expected to be the future of the world wide web. Here are three fundamentally solid stocks that are well-positioned to capitalize on the new internet era.
International Business Machines Corporation (IBM)
IBM is a technology company that operates as a global integrated solutions and services provider. The company functions through the four broad business segments of Software; Consulting, Infrastructure; and Financing.
For the fiscal first quarter ended March 31, IBM’s total revenue increased 7.7% year-over-year to $14.20 billion. Non-GAAP gross profit rose 4.4% from the prior-year quarter to $7.52 billion. Non-GAAP income from continuing operations and non-GAAP EPS improved 25.5% and 25% from the same period last year to $1.27 billion and $1.40.
The consensus EPS estimate of $9.82 for fiscal 2022 indicates a 23.8% year-over-year increase. Likewise, the consensus revenue estimate for the same year of $60.68 billion reflects a rise of 5.8% from the prior year.
The stock has gained 2.5% over the past five days and 2.4% intraday to close yesterday’s trading session at $129.15.
IBM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
IBM has a Value grade of B, in sync with its forward non-GAAP P/E multiple of 12.67, 33.4% lower than the industry average of 19.03. In terms of its forward Price/Sales, the stock is trading at 1.87x, 41.7% lower than the industry average of 3.21.
IBM has a B grade for Quality. This is consistent with its trailing 12-month EBITDA margin, net income margin, and ROE, which are 21.25%, 10.01%, and 23.86%, which are 55.21%, 83.71%, and 227.70% higher than their respective industry average of 13.69%, 5.45%, and 7.28%.
Microsoft Corporation (MSFT)
MSFT is a software behemoth providing software services, solutions, and devices worldwide. The company sells its products through distributors, OEMs, resellers, or digital marketplaces.
For the fiscal second quarter ended December 31, MSFT’s total revenue increased 20.1% year-over-year to $51.73 billion. Operating income increased 24.3% from the prior-year quarter to $22.25 billion. Net income and EPS stood at $18.77 billion and $2.48, registering an increase of 21.4% and 22.2% year-over-year, respectively.
Analysts expect MSFT’s EPS to improve 8.8% year-over-year to $2.36 for the fiscal quarter ending June 2022, while Street revenue estimate of $52.88 billion for the same period indicates a rise of 14.6% from the prior-year period. In addition, MSFT has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters. MSFT’s EPS is expected to increase 16.1% per annum over the next five years.
MSFT’s stock has gained 10.3% over the past year and 1.7% intraday to close yesterday’s trading session at $285.30.
It’s no surprise that MSFT has an overall B rating, which translates to Buy in our POWR Rating system.
MSFT has a Sentiment grade of A, which is justified by its favorable analyst sentiments.
The stock has a Stability grade of B in sync with its five-year monthly beta of 0.91. MSFT also has a B grade for Quality.
Intel Corporation (INTC)
INTC is a popular tech company that designs, manufactures, and sells computer products and technologies globally. The company operates through the segments of CCG; DCG; IOTG; Mobileye; NSG; PSG; and All Other.
For the fiscal fourth quarter ended December 25, INTC’s non-GAAP net revenue increased 3.5% year-over-year to $19.53 billion. For the fiscal year ended December 25, non-GAAP net income and non-GAAP EPS came in at $22.36 billion and $5.47, up 3.5% and 7.3% from the prior year.
The consensus EPS estimate of $3.69 for fiscal 2023 indicates a 3.4% year-over-year increase. Likewise, the consensus revenue estimate for the same year of $77.57 billion reflects an improvement of 2.1% from the prior year. Moreover, INTC has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has declined 2% over the past five days and 2.8% intraday to close yesterday’s trading session at $47.93.
This promising prospect is reflected in INTC’s POWR Ratings. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
INTC has a Value grade of A, consistent with its forward Price/Book multiple of 1.83, 61.4% lower than the industry average of 4.74. In terms of its forward Price/Cash Flow, the stock is trading at 6.67x, 64.1% lower than the industry average of 18.56.
INTC has a B grade for Sentiment, which is justified by its favorable analyst sentiments. The stock also has a Quality grade of B.
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IBM shares rose $0.18 (+0.13%) in after-hours trading Wednesday. Year-to-date, IBM has gained 4.73%, versus a -6.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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