People spend a lot of time on their devices, but the actual number may surprise you. The average American spends 4.5 hours on their smartphone each day, and that’s not even including laptops and tablets.
Our digital devices give us access to many perks that are more difficult to obtain in the real world. The digital world makes it easy for people to buy any product, access various entertainment options, and communicate with people from anywhere.
Investors can generate sizable returns by observing others. People spend a lot of time on their phones but also a lot of money. Some leaders in the digital world generate billions of dollars in quarterly revenue. These same businesses have delivered impressive long-term returns for their shareholders.
Are you wondering which companies make sense for capitalizing on the digital world? These digital stocks offer plenty of potential for patient investors with lengthy time horizons.
Meta Platforms (META)
It’s no secret that most people spend hours online and use the web to make purchasing decisions. They read online reviews, look at advertisements, and read detailed articles to determine which products to buy.
Many businesses want to show up in front of the right people more often, and they turn to companies like Meta Platforms (NASDAQ:META) to make it happen. Facebook’s parent company has 3.24 billion daily active users across its social networks, offering plenty of prospects for advertisers.
The company is still growing at a torrid pace despite being well-known. Revenue increased by 27% year-over-year in the first quarter while net income was up by 115%. Meta Platforms has been boosting its profits during its year of efficiency, which led to meaningful returns. Shares are up by 38% year-to-date and have gained 140% over the past five years. The stock trades at a price-to-earnings ratio of 27.5x and offers a 0.4% dividend yield.
Amazon (AMZN)
It’s hard to think of a company that has done better in the digital world than Amazon (NASDAQ:AMZN). The tech giant released its online marketplace more than 30 years ago, and it’s still bringing in billions of dollars every quarter. Amazon redefined how people shop for products and services and expanded into high-growth industries like cloud computing, advertising, gaming, groceries, and artificial intelligence.
The tech conglomerate reported 13% year-over-year revenue growth in the first quarter, demonstrating that growth is still strong after so many years. Net income more than tripled as well. Amazon enjoyed a 22% year-to-date gain and is up 86% over the past five years.
While those gains are good, Wall Street believes the stock has more to give. The stock is rated as a “strong buy”, and the average price target implies a 22% upside from current levels. The highest price target of $250 per share suggests the stock can gain an additional 37%.
Alphabet (GOOG, GOOGL)
While Meta Platforms is an advertising leader in its own right, one tech giant surpasses it. Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) makes billions each quarter from ad placements on Google, YouTube, and websites that use Google AdSense. The tech giant surpassed a $2 trillion market cap earlier this year and logged a 29% year-to-date gain. Shares are also up by 217% over the past five years.
Alphabet presents a healthy mix of growth and value. On one hand, the stock has a 28x P/E ratio and a 0.4% yield. On the other hand, Alphabet delivered 15% year-over-year revenue growth and 57% net income growth in the first quarter. Alphabet is also looking at cost-cutting measures that can increase value for long-term investors. The company’s recently announced dividend further highlights leadership’s commitment to shareholders.
Wall Street analysts like what they see and have rated the stock as a “strong buy.” The average price target suggests the stock can gain an extra 14%.
Fortinet (FTNT)
The digital world has enabled many possibilities but has also created many risks. One key concern is how much data hackers can access if they infiltrate a company’s database. Cyberattacks can cost millions of dollars and hurt brand loyalty.
Corporations and small businesses turn to cybersecurity giants like Fortinet (NASDAQ:FTNT) to keep their data safe. Cybersecurity stocks also generated impressive long-term returns for investors. For instance, Fortinet has more than tripled over the past five years.
While any investor would be happy with those five-year gains, Fortinet had a rough 2023. Revenue and net income growth decelerated, slamming the brakes on stock gains. However, the tide appears to be changing. Fortinet reported 7.2% year-over-year revenue growth and 20.8% net income growth in the first quarter. Service revenue was a big highlight that jumped by 24.8%. Fortinet is currently rated as a “hold” with a projected 18% upside.
Upwork (UPWK)
The internet doesn’t only offer ways for people to find entertainment and buy products from anywhere in the world. It has created many career opportunities and made it easier for people to work remotely. Investors hoping to capitalize on this trend may consider Upwork (NASDAQ:UPWK).
The online freelance marketplace hasn’t had the best year as a stock. It’s down by 20% year-to-date, but that dip has resulted in a P/E of 34x. Furthermore, revenue and net income are both on the upswing. Upwork reported 18.7% year-over-year revenue growth and 7.4% net income growth in the first quarter. The freelance marketplace’s advertising revenue continued to soar and recorded a 93% gain from a year ago. Revenue from Freelancer Plus subscriptions increased by 76% as the platform surpassed 100,000 active members.
Upwork is also making investments into artificial intelligence that enhance the user experience. Uma, Upwork’s Mindful AI, helps match employers and freelancers for optimal positions.
Semrush (SEMR)
Semrush (NYSE:SEMR) serves business owners and influencers who want more people to know about their businesses. Instead of offering ad placements, Semrush offers tools that help people with keyword research and ad campaign optimization. The company has attracted nearly 112,000 paying customers to several subscription plans. Semrush also has 1.12 million registered free customers on its email list.
The company successfully raised the average revenue per customer while attracting more customers. This dynamic should help Semrush deliver enticing long-term returns for its investors. Shares are up by 5% year-to-date and gained 38% over the past year. The firm delivered 21% year-over-year revenue growth and 122% net income growth in the first quarter.
Wall Street analysts are confident that the company will continue to gain market share and reward patient investors. It’s rated as a “moderate buy” among five analysts and has an average price target that suggests a 15% upside. The highest price target of $18 per share implies that Semrush can gain an additional 30% from current levels.
Duolingo (DUOL)
Duolingo (NASDAQ:DUOL) is a leading educational app that helps people learn new languages. The company has also expanded to offer verbal and written lessons for math, music, and other subjects. Although it looks attractive in the long run, it has endured an 18% year-to-date loss.
The company’s substantial net income growth is a key reason for confidence. Duolingo reported $27 million in profits in the first quarter, compared to a $2.6 million net loss in the same period last year. Duolingo also reported 45% year-over-year revenue growth to reach $167.6 million in sales.
Duolingo’s financials weren’t the only positive development. The firm is rapidly expanding its user base. About 31.4 million people use the app daily, a 54% improvement from a year ago. Meanwhile, monthly active users totaled 97.6 million people, marking a 35% improvement. A soaring user base that’s very active should pave the way for more gains. Recent stock price movements don’t align with the company’s long-term potential.
On this date of publication, Marc Guberti held long positions in AMZN and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in AMZN.
