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5 Growth-Focused Internet Stocks to Dodge Coronavirus Woes

Radhika Pujara
·6-min read

Internet stocks are riding on massive demand for cloud computing services, courtesy of work-from-home, online learning and remote health diagnostic trends.

The optimism surrounding Internet stocks can be ascertained by the robust performance of Invesco NASDAQ Internet ETF PNQI, which has rallied 42.5% on a year-to-date basis compared with the SPDR S&P 500 ETF’s SPY return of 2.2%.

The significance of Internet amid the pandemic cannot be overstated as it emerged as a beacon of light helping people cope with the new normal. In fact, the importance of Internet will continue to increase amid this pandemic with no vaccine yet in sight.

In fact, most economies globally are enduring the ordeal on the back of services related to video conferencing, gaming, online learning, to name a few. It goes without saying that Internet has been a key factor in facilitating digital transformation across industries and innovations in cloud computing.

What’s Driving Internet Stocks?

The practice of social distancing in a bid to contain the virus spread has bolstered the usage of Internet-of-Things (or IoT) based services, robotics, e-commerce, contactless payment and online delivery solutions, worldwide.

Demand for SaaS-based (or Software as a Service) applications pertaining to employee collaboration, cybersecurity, infrastructure monitoring, asset performance management and human capital management solutions, telehealth care, remains significantly high.

Additionally, stay-at-home wave has increased user engagement across social-media platforms, online gaming, music and video streaming services.

Winning Criteria

Here we zero in on five Internet-focused stocks that are well-poised to grow in the backdrop of the new normal lifestyle owing to the pandemic.

Each of these stocks has a favorable combination of a Growth Score of A 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 growth or revenue growth, which should propel their stock price higher in the future. The Growth Style Score analyzes the growth prospects for a company and evaluates its corporate financial statements.

By concentrating on Zacks Rank #1 and 2 stocks, growth investors can easily screen for companies, utilizing Zacks Stock Screener, exhibiting these stellar growth rates with a likelihood of it continuing. Per the Zacks’ proprietary methodology, stocks with this favorable combination offer good investment opportunities.

Notably, each of the five stocks has outperformed the S&P 500 composite on a year-to-date basis.

Year-to-Date Performance





Videoconferencing titan, Zoom Video Communications ZM continues to add record number of subscribers and expand enterprise customer base amid the coronavirus-induced remote-working and online-learning wave. Easy to deploy, use, manage and solid scalability make Zoom Video’s software popular among customers.

Moreover, this Zacks Rank #1 company company’s efforts to eliminate the security and privacy loopholes, and new hardware and Zoom From Home solution’s launch are expected to help in expanding clientele. Moreover, per a report from Global Market Insights, the global video conferencing market is expected to go beyond $50 billion by 2026.

The Zacks Consensus Estimate for its fiscal 2021 earnings has moved north by 86.6% to $2.37 per share in the past 30 days. The earnings estimate figure suggests growth of 577.1% year over year.

JD.com JD is benefiting from robust adoption of e-commerce services in China. The company active customer base expanded 29.9% to 417.4 million in the 12 months ended Jun 30, 2020. Moreover, mobile daily active user count in June 2020 increased 40% year over year.

The consensus mark for this Zacks Rank #1 company’s 2020 earnings has been revised upward by 20.8% to $1.51 per share in the past 60 days. The earnings estimate figure suggests growth of 45.2% year over year.

Shopify SHOP is riding on exponential surge in buying of essential items due to COVID-19 induced lockdowns and shelter-in-place guidelines. Moreover, robust performance of Shopify Shipping, Shopify Payments and Shopify Capital are key catalysts for this Zacks Rank #2 company.

Furthermore, solid uptake of new merchant-friendly applications amid evolving retail environment, and e-commerce boom bodes well. Also, partnerships with Walmart and Facebook are expected to expand merchant base. Initiatives aimed at international expansion remain noteworthy.

The Zacks Consensus Estimate for 2020 earnings has moved upward by 5.8% to $2.37 per share in the past 30 days. The earnings estimate figure suggests growth of 690% year over year.

Etsy ETSY is benefiting from growing Marketplace and Services revenues. Solid momentum across active sellers and buyers remains a major positive. Moreover, enhancements in search and discovery are driving momentum among buyers. Robust Etsy ad program is also aiding seller base growth.

Further, the coronavirus-induced e-commerce boom and increasing mask sales are tailwinds. Also, the company is witnessing solid traction among reactivated buyers, which is contributing well. Benefits from the Reverb buyout are other positives.

The Zacks Consensus Estimate for its current-year earnings is pegged at $2.07 per share, having been revised upward by 2 cents in the past 30 days. The earnings estimate figure suggests growth of 172.4% year over year.

Dropbox DBX has been gaining from 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 coronavirus crisis 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 are likely to expand the Dropbox paying-user base over the long run.

The Zacks Consensus Estimate for its 2020 earnings has moved north by 4.1% to 77 cents per share in the past 60 days. The earnings estimate figure suggests growth of 54% year over year.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.

Click here for the 6 trades >>


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SPDR SP 500 ETF (SPY): ETF Research Reports
 
JD.com, Inc. (JD) : Free Stock Analysis Report
 
Etsy, Inc. (ETSY) : Free Stock Analysis Report
 
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
 
Shopify Inc. (SHOP) : Free Stock Analysis Report
 
Dropbox, Inc. (DBX) : Free Stock Analysis Report
 
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
 
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