WebMD Health Corp. (WBMD) and LendingClub Corp’s (LC) recent earnings have the internet stocks on my radar. These companies reported solid earnings and in both cases the stocks moved higher afterwards.
While certain sectors of the economy struggle, these companies continue to perform.
We are early in the year, but 2016 has been a rough one if you have any link to oil prices. Fortunately for internet companies, they will not be directly affected by the oil sector and so far 2016 hasn’t been too bad for the space. If conditions were to worsen and the entire economy started to see a slowdown there would be a risk to the stocks.
Until then, let’s stick with these 4 internet stocks to buy performers.
WebMD Health (WBMD) is a Zacks Rank #2 (Buy) that provides health information services to consumers, physicians and other healthcare professionals. The company aims to provide valuable health information, tools for managing your health, and support to those who seek information.
WebMD has a market cap of $2 billion and a forward PE of 31. The company sports a Zacks Style Score of “B” in growth, but “D” in value. Because this valuation is in question short sellers have piled in with 19% of the stock short, giving the company a 7.5 short ratio and short squeeze potential. The company’s valuation is something investors have questioned in the past and exceeding earrings expectations is a catalyst for the stock price.
On February 23rd the company reported Q4 earnings of 60 cents per share versus the 57 cents per share expected. Revenue came in slightly higher for the quarter at $192 million versus the $191 expected. In addition, the company went on to guide fiscal year 2016 revenue $685-705 million versus $694 million. Traffic on the website reached 201 million unique users per month, generating almost 4 billion page views for the quarter, increases of 6% and 7% from the prior year period.
The stock surged almost 5% higher after the numbers. It looks poised to take out all time highs above $60.
The earnings beat isn’t much of a surprise as this makes its fifth EPS upside surprise in a row. Looking at the chart below, we see stock performance has followed company performance and will likely push to all time highs.
Shutterfly (SFLY) is a Zacks Rank #2 (Buy) that manufactures and retails digital personalized products and services. Shutterfly provides a range of products and services that make it easy, convenient and fun for consumers to upload, edit, enhance, organize, find, share, create, print and preserve their digital photos in a creative and thoughtful manner.
The company has a market cap of $1.5 billion and a forward PE 82. The stock sports a Zacks Style Score of “A” in growth and scores of “B” in Value and momentum. The company has a potential for a short squeeze with a short float of 12% and a short ratio of 10.
On February 3rd, the company reported Q4 earnings of $3.45 a share versus the $3.58 expected. Revenue came in higher for the quarter at $548 million versus the $543 expected. Shutter fly went on to guide Q1 GAAP 19 cents-58 cents per share versus 48 cents per share expected. While these numbers don’t seem good at first glance, the company continues to expand margins, guiding fiscal year gross margin at 58.3% verse the 57.9% expected.
Interim CEO Philip A. Marineau went into the quarter in detail in the call: “We are starting to see the benefit from our strategic investments in expanding margins, and we expect free cash flow to continue growing faster than revenue as we enter a more normalized capital spending cycle. The team is excited to begin rolling out the first phase of Shutterfly 3.0 in the first quarter of 2016, providing customers with a superior memory preservation and creation experience.”
Shutterfly has recently downplayed rumors that the company was being acquired. They did receive an expression of interest from a private equity firm, but they are currently not in acquisition talks.
LendingClub (LC) is a Zacks Rank #2 (Buy) that provides financial services online. The San Francisco Company offers online marketplace for loan approval, pricing, servicing and support operations as well as regulatory and legal framework which connects borrowers and investors.
LendingClub has a market cap of $3.5 billion and a Forward PE of 107. The stock sports Zacks Style Scores of “B” in both Growth and Momentum. The high PE has earned the stock a “D” in value and has been part of the reason the stock is down over 60% from its IPO debut. Short sellers have been attracted to this stock, with 15% of the float short and a short ratio of 7.
On February 3rd, the company reported Q4 earnings of 5 cents per share versus the 3 cents per share expected. Revenue came in higher for the quarter at $134.5 million versus the $129 expected. Loan origination came in at $2.6 billion, a year over year increase of an impressive 82%. Average investors return after credit losses and fees in 2015 was nearly 8%, a number that will keep investors coming back. This liquidity is important to loan originations that support ongoing business and gives the company the ability to grow.
LendingClub has been very disappointing after making a post IPO high on $29.29. Since that high almost a year ago, the stock fell almost 80% to a low of $6.34 earlier this month. The recent earnings put a bid in the stock and we have seen a 35% rally since.
Looking at the chart below we see that the stock price is not following analyst estimates. The valuation is the main reason for this, but if the company can show potential to grow into the PE the current move will gain traction.
Web.com (WEB) is a Zacks Rank #2 (Buy) that is a a leading provider of online marketing for small businesses. The company’s goal is to help small businesses succeed online by enabling them to establish, maintain, promote, and optimize their online presence. Web.com has a market cap of $900 Million and a Forward PE of 8. The stock sports Zacks Style Scores of “A” in Value.
On February 11th, the company reported Q4 earnings of 66 cents per share versus the 63 cents per share expected. Revenue came in higher for the quarter at $141.3. million versus the $139 expected. Net subscriber additions were up an impressive 22,000 verse 15,000 quarter over quarter.
The stock reacted very positively to the numbers, surging 15% higher. With a short ratio of 8, the short sellers undoubtedly helped the stock higher. Any pull back should be bought and the stock should be considered a value play.
Summary of Internet Stocks to Buy
This year has and will continue to be a volatile one for stocks. Companies that have no direct link to oil will provide an investor with less risk going forward. The catalyst for any company in this environment is earnings and the ability to continue growing EPS. Going forward, internet companies give investors an opportunity to capture growth in a risky macro environment.
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