The growing internet usage, coupled with increasing digitization, has strengthened the internet services industry. Given this backdrop, let’s analyze whether internet services stocks Global-E Online (GLBE) and Wix.com (WIX) are worth buying now. Read on….
The rising necessity for swift and effective connectivity has positioned the internet services industry for significant growth. Against this backdrop, internet services stock Wix.com Ltd. (WIX) could be a wise portfolio addition, given its solid profitability. Conversely, it would be best to avoid Global-E Online Ltd. (GLBE), given its weak fundamentals.
Before delving deeper into the fundamentals of the two stocks, let’s take a quick look at the industry landscape.
A recent analysis revealed that, in 2024, 5.35 billion people had been using the internet, which is 66.2% of the global population. Over the past year, internet users have grown by 1.8%, with around 97 million new users using online platforms for the first time. This rising internet adoption should bode well for the industry.
Consumers are anticipated to purchase more products from social media directly in 2024 than from third-party websites and brand websites. The growing online shopping trend and increased usage of the internet and smartphones have boosted the internet services market remarkably.
Moreover, the digital revolution worldwide, propelled by wireless technology adoption, promises heightened productivity and cost savings, fueling substantial growth in internet services.
Furthermore, growing trends such as 5G, blockchain, AR, AI, and cloud services have impacted the internet services market, and continued growth is expected in the upcoming years. Consequently, the global internet services market is forecasted to reach $733.79 billion, recording a 4.4% CAGR by 2031.
With these favorable trends in mind, let’s delve into the fundamentals of the two Internet – Services stock picks, starting with the weakest from the investment point of view.
Stock #2: Global-E Online Ltd. (GLBE)
Headquartered in Petah Tikva, Israel, GLBE provides a platform to enable and accelerate direct-to-consumer cross-border e-commerce in Israel, the United Kingdom, the U.S., and internationally.
GLBE’s trailing-12-month asset turnover ratio of 0.48x is 51.7% lower than the industry average of 1x. Similarly, its trailing-12-month cash per share of $1.21 is 53.5% lower than the industry average of $2.60.
For the fiscal fourth quarter that ended December 31, 2023, GLBE’s revenue and non-GAAP gross profit stood at $185.40 million and $79.12 million, respectively. Moreover, its adjusted EBITDA stood at $35.18 million.
For the same quarter, its net loss attributable to ordinary shareholders and basic and adjusted net loss per share attributable to ordinary shareholders stood at $22.10 million and $0.13, respectively. As of December 31, 2023, GLBE’s accumulated deficit rose 41.4% year-over-year to $456.85 million.
The Street expects GLBE’s revenue and EPS in the fiscal first quarter ending March 2024 to be $141.69 million and $0.10, respectively.
The stock has declined 16.8% over the past month to close the last trading session at $34.11. Over the past three months, it has declined 14.4%.
GLBE’s bleak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an F grade for Value and a D for Stability. Within the D-rated Internet – Services industry, it is ranked #22 out of 28 stocks.
To see additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for GLBE, click here.
Stock #1: Wix.com Ltd. (WIX)
Headquartered in Tel Aviv, Israel, WIX develops and markets a cloud-based platform that enables to create a website or web application in North America, Europe, Latin America, Asia, and internationally.
Recently, WIX announced amendments to the Israeli Companies Regulations, which eliminate the requirement to obtain mandatory Israeli court approval for share repurchases for companies that were otherwise required to obtain such approval. The Relief Regulations will streamline required regulatory approvals for share repurchases, allowing WIX to expedite its ability to begin execution of share repurchase activity.
As previously announced, WIX is in the process of pursuing the necessary approvals required under Israeli law, now under the new Relief Regulations, for $225 million in additional share repurchases, as authorized by the Board of Directors.
On March 6, WIX announced that three new providers – Airpay, Easebuzz, and Nimbbl, have been onboarded, enhancing WIX’s offerings to its Indian merchants and providing more options for users. Additionally, two other providers – Razorpay and Cashfree have regained approval from the Reserve Bank of India (RBI), allowing them to onboard new users once again.
These providers offer a range of features and capabilities tailored to diverse business models, ensuring that merchants can seamlessly integrate payment solutions into their WIX websites.
WIX’s trailing-12-month asset turnover ratio of 0.88x is 44.4% higher than the industry average of 0.61x, while its trailing-12-month cash per share of $10.64 is 411.4% higher than the industry average of $2.08.
For the fiscal fourth quarter that ended December 31, 2023, WIX’s revenues and non-GAAP gross profit stood at $403.77 million and $282.01 million, up 13.7% and 21.8% year-over-year, respectively. Moreover, its free cash flow increased 108.3% from the prior-year quarter to $80.39 million.
For the same quarter, its non-GAAP net income and non-GAAP net income per share stood at $74.04 million and $1.22, up 107.8% and 100% from the year-ago quarter, respectively.
Street expects WIX’s revenue and EPS for the fiscal first quarter ending March 2024 to increase 11.7% and 16.1% year-over-year to $417.70 million and $1.06, respectively. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 62.9% over the past nine months to close the last trading session at $138.52. Over the past year, it has gained 55.2%.
WIX’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
WIX has an A grade for Growth and a B for Sentiment. It is ranked #4 within the same industry.
Click here for the additional POWR Ratings for WIX (Value, Momentum, Stability, and Quality).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
WIX shares were unchanged in premarket trading Tuesday. Year-to-date, WIX has gained 12.60%, versus a 7.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor’s degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals.Neha’s primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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