The accelerated shift towards digitalization during the pandemic has intensified the demand for the internet. Moreover, the rise in internet usage has provided a significant boost to internet service providers, who are taking advantage of the growing trend of online activities like shopping, digital payments, and remote work.
In addition, the emergence of 5G technology represents a major milestone in the global telecommunications industry, with the potential to revolutionize numerous other sectors as well. Furthermore, 5G-enabled technologies are playing a pivotal role in facilitating the growth of intelligent manufacturing and smart factories, delivering compelling benefits to manufacturers.
Thus, the global private 5G market is expected to grow at a CAGR of 49.7% to reach $41.80 billion by 2030.
In addition, the increasing demand for affordable smart wireless sensors is likely to drive the growth of the wireless internet industry. According to a report by ReportLinker, the global wireless internet services market is estimated to reach $921.97 billion by 2027, growing at a 7% CAGR.
With these favorable trends in mind, let’s delve into the fundamentals of the three Internet – Services stock picks, beginning with the third choice.
Stock #3: Shopify Inc. (SHOP)
Headquartered in Ottawa, Canada, SHOP, an e-commerce company, provides a commerce platform and services in Canada, the United States, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The company’s platform enables merchants to display, manage, market, and sell products through various sales channels.
SHOP’s revenue and total assets have grown at a CAGR of 44.7% and 23.9% over the past three years and 49.2% and 39.9% over the past five years.
On August 23, SHOP announced that Solana Pay, an open-source peer-to-peer payments protocol developed by Solana Labs, had been officially integrated with Shopify Inc., a prominent global commerce company. This integration opens up access to millions of businesses, allowing them to use Solana Pay for decentralized and secure payment processing within the Shopify ecosystem.
For the fiscal second quarter that ended June 30, 2023, SHOP’s revenues increased 30.8% year-over-year to $1.69 billion, while its gross profit came in at $835 million, up 27.3% from the prior-year quarter. Its adjusted operating income was $146 million.
Analysts expect SHOP’s EPS and revenue to rise 204.5% and 19.9% year-over-year to $0.21 and $2.08 billion in the fiscal fourth quarter ending December 2023.
The stock has gained 112% over the past year to close the last trading session at $66.49.
SHOP’s POWR Ratings reflect its sound fundamentals. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
SHOP also has a B grade for Sentiment and Growth. It is ranked #23 out of 30 stocks in the Internet – Services industry.
Click here for the additional POWR Ratings for Momentum, Stability, Value, and Quality for SHOP.
Stock #2: Wix.com Ltd. (WIX)
Headquartered in Tel Aviv, Israel, WIX develops and markets a cloud-based platform for creating websites and web applications. Its offerings include a visual development platform for customized website creation. The company also provides vertical-specific applications and complementary services like App Market and Owner App for website management.
WIX’s revenue and total assets have grown at a CAGR of 19.7% and 10.5% over the past three years and 23.3% and 17.9% over the past five years.
On July 17, WIX announced its plans to launch the AI Site Generator, along with a suite of AI-powered capabilities, many of which are already available to users.
These features are designed to provide WIX users with cutting-edge AI technology, greatly simplifying the process of creating, designing, and managing websites. They offer a range of automated tools to help users efficiently run and expand their businesses with unprecedented ease.
During the first quarter that ended June 30, 2023, WIX’s total revenue increased 13% year-over-year to $390 million. Its gross profit rose 24.6% year-over-year to $262.08 million
In addition, its non-GAAP net income came in at $78.09 million, compared to a non-GAAP net loss of $7.83 million in the prior-year quarter. Also, its non-GAAP EPS came in at $1.26, compared to a non-GAAP loss per share of $0.14 in the year-ago quarter.
Street expects WIX’s EPS to rise significantly year-over-year to $0.71 in the third quarter ending September 2023. Its revenue is expected to increase 12.7% year-over-year to $389.77 million for the same quarter. It has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is remarkable.
Over the past year, the stock has gained 28.6% to close the last trading session at $98.77.
WIX’s POWR Ratings reflect strong prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment and Quality. It is ranked #4 in the same industry.
To see the WIX’s additional ratings for Value, Momentum, and Stability, click here.
Stock #1: 8×8, Inc. (EGHT)
EGHT provides voice, video, chat, contact center, and enterprise-class application programmable interface (API) Software-as-a-Service solutions for small and mid-size businesses, mid-market and larger enterprises, government agencies, and other organizations worldwide.
EGHT’s revenue and total assets have grown at a CAGR of 16.2% and 6.4% over the past three years and 19% and 21.3% over the past five years.
On August 30, EGHT announced the availability of voice conversational AI in 8×8 Intelligent Customer Assistant. The addition of voice expands 8×8 Intelligent Customer Assistant’s powerful, user-friendly conversational AI self-service capabilities that enable businesses to create simple to complex experiences across digital and voice channels.
On July 20, EGHT announced that Kubota Tractor Corporation had deployed the 8×8 XCaaS™ (eXperience Communications as a Service™) cloud contact center and unified communications platform for increased flexibility and ease of use across the entire organization.
During the fiscal fourth quarter that ended March 31, 2023, EGHT’s total revenue increased 2% year-over-year to $184.53 million. Its total operating expenses decreased 18.4% year-over-year to $181 million. The company’s non-GAAP net income amounted to $12.67 million or $0.11 per share, rising 124.6% and 120% from the previous-year quarter.
EGHT’s EPS is expected to rise 71.2% from the year-ago quarter to $0.09 in the fiscal second quarter ending September 2023. Its revenue is expected to amount to $183.60 million in the current quarter. The company has surpassed the EPS estimates in three of the trailing four quarters.
The stock soared 4.2% intraday, closing the last trading session at $3.25.
It is no surprise that EGHT has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock also has an A grade for Value and a B for Growth. It is ranked #2 in the same industry.
In addition to the POWR Ratings stated above, one can also access EGHT’s additional ratings for Momentum, Stability, Sentiment, and Quality here.
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SHOP shares were trading at $66.66 per share on Friday morning, up $0.17 (+0.26%). Year-to-date, SHOP has gained 92.05%, versus a 18.81% 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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