Current market bullishness is evidenced by the benchmark indices’ stellar performance of late. Both S&P 500 and the Dow Jones Industrial Average (DJIA) reached fresh highs on October 26. Furthermore, the DJIA rallied for the third straight day to hit a record level. Tech stocks have been among the major drivers of the market’s stellar performance.

Internet users are growing at a 4.8% annual rate, amounting to an average of more than 600,000 new users each day. Currently, 62% of the world’s population uses the internet, and Cybersecurity Ventures predicts that there will be more than 7.5 billion internet users by 2030, representing approximately 90% of the projected world population. In addition, Biden Administration proposed spending will boost the internet services’ growth prospects by allocating $65 billion from its bipartisan infrastructure bill for the expansion of broadband access.

Given the bullish market sentiment and favorable industry trends, we think betting on fundamentally sound internet stocks Ziff Davis, Inc. (ZD), Shutterstock, Inc. (SSTK), and Perion Network Ltd. (PERI) could be rewarding.

Ziff Davis, Inc. (ZD)

ZD is a digital media and internet company with technology, entertainment, shopping, and cybersecurity investments. The Los Angeles-based company operates technology brands that include Mashable, Ookla, Ekahau, and Mosaik. The company changed its name from j2 Global, Inc. to Ziff Davis Inc. in October 2021.

On October 8, ZD announced that its Consensus business would commence trading as a publicly traded company, Consensus Cloud Solutions Inc. (CCSI). A special dividend distribution gave ZD shareholders one share of CCSI common stock for every three shares of ZD. The separation is expected to create value through market innovation and efficient capital allocation.

Also this month,  ZD predecessor j2 Global Inc. (JCOM) completed four acquisitions and one divestiture administered during  the third quarter of this year. The acquisitions of Solutelia, BigLinker, Diabetes Daily assets, and Arthur L. Davis Publishing Agency, Inc. are expected to grow its customer base and expand its product line-up.

For its second fiscal quarter, ended June 30, ZD’s total revenues increased 29.6% year-over-year to $429.04 million. Its gross profit rose 33.4% from the prior-year quarter to $365.71 million. Its adjusted non-GAAP net income stood at $107.86 million, up 33.8% from the same period last year, while its adjusted non-GAAP net income per share improved 40.9% year-over-year.

A $9.72 consensus EPS estimate for the current year (fiscal 2021) indicates an 18.8% year-over-year increase. Likewise, the $1.75 billion consensus revenue estimate for the current year reflects a 17.4% improvement from the prior-year. Furthermore, ZD has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.

The stock has gained 112.8% in price over the past year and 50.8% year-to-date to close yesterday’s trading session at $128.10.

ZD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, 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.

ZD has a B Value and Quality grade. In the 38-stock Internet – Services industry, it is ranked #6. Click here to see the additional POWR Ratings for ZD (Growth, Momentum, Stability, and Sentiment).

Shutterstock, Inc. (SSTK)

SSTK is a New York City-based technology company that provides its global customers with content, tools, and services. Its offerings include photographs, illustrations, and vectors used in websites and digital and print marketing mediums.

On October 26, as a part of its quarterly product update, SSTK launched two new applications and one new e-commerce mixed-asset subscription. These new product launches reflect SSTK’s progress in workflow innovation and performance enhancement.

On September 15, SSTK launched its television campaign with a TV commercial called ‘100% Shutterstock.’ The campaign aims to expand people’s perception of its offerings by showcasing them on one platform while keeping the creative concept flexible.

Also in September, the company acquired PicMonkey, an online graphic design, and image editing platform. The acquired platform’s easy-to-use designing and editing tools should enable SSTK to speed up its solutions’ delivery process.

SSTK’s revenue increased 17.7% year-over-year to $194.44 million in its third fiscal quarter, ended September 30. For the nine months ended September 30, the company’s adjusted net income rose 66.4% from the same period last year to $100.93 million, while its adjusted net income per share improved 61.3% year-over-year to $2.71.

Street $3.08 EPS estimate for the current year (fiscal 2021) reflects a 17.6% rise from the prior year. Likewise, the Street’s $752.44 million revenue estimate for the current year indicates a 12.9% year-over-year improvement. In addition, SSTK has beaten consensus EPS estimates in each of the trailing four quarters.

SSTK’s stock has gained 99.6% over the past year and 73.4% year-to-date to close yesterday’s trading session at $124.31.

It’s no surprise that SSTK has an overall B rating, which translates to Buy in our POWR Ratings system. SSTK has an A grade for Quality and a B grade for Sentiment. It is ranked #5 on the Internet – Services industry.

To see the additional POWR Ratings for Growth, Value, Momentum, and Stability for SSTK, click here.

Perion Network Ltd. (PERI)

PERI operates as an advertising company, delivering online advertising solutions and search monetization to brands and publishers. It provides data-driven execution, from high-impact ad formats to branded search and a unified social and mobile programmatic platform. It is based in Holon, Israel.

On October 20, PERI launched SORT™, a privacy-oriented solution that provides cookie-less technology. Regarding the launch, Doron Gerstel, CEO at Perion, said, “Perion continues to innovate across all units, and this market responsive, hyper-effective solution is just one example of the ground-breaking work our Engineering teams are capable of.”

On October 4, PERI acquired video technology company Vidazoo, which enables PERI to deliver high-impact content solutions to its advertising and publishing customers. The acquisition should bolster PERI’s operational capacity.

For its third fiscal quarter, ended September 30, PERI’s total revenue increased 45.1% year-over-year to $121.03 million. Its non-GAAP net income improved 158.8% from the prior-year quarter to $15.39 million, while its non-GAAP EPS increased 90.5% from the same period last year to $0.40. Its adjusted EBITDA improved 101.3% from the same period last year to $17.61 million.

Analysts expect its EPS to increase 112.5% year-over-year to $0.68 in the current year (fiscal 2021). The Street’s $438.29 million revenue estimate for the current year indicates a 33.6% year-over-year rise. In addition, PERI has topped consensus EPS estimates in each of the trailing four quarters.

PERI’s stock has gained 280.6% in price over the past year to close yesterday’s trading session at $29.08. It has gained 128.4% year-to-date.

PERI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating which equates to Buy in our proprietary rating system. It has a Growth, Value, and Sentiment grade of A, and a Quality grade of B. It is ranked #3 in the Internet – Services industry.

In addition to the POWR Ratings we’ve stated above, one can see PERI’s ratings for Momentum and Stability here.

ZD shares were trading at $128.22 per share on Wednesday afternoon, up $0.12 (+0.09%). Year-to-date, ZD has gained 31.25%, versus a 22.93% 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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