3 Internet Stocks to Buy From a Prospering Industry

Core Viewpoint - The Zacks Internet - Content industry is experiencing growth driven by strong demand for digital offerings, video content, and cloud-based applications, although it faces challenges from macroeconomic conditions and regulatory pressures [1][4]. Industry Overview - The industry includes providers of video encoding platforms, Internet content, staffing services, and online travel companies, with advertising as a major revenue source [2]. - Companies are expanding their digital presence across social media, display, connected TV, and search to attract customers [2]. Trends Influencing the Industry - There is a growing demand for digital offerings, with technological advancements and an increase in mobile and cloud-based services acting as growth drivers [3]. - Advertising and subscriptions are key revenue sources, but macroeconomic challenges like inflation and higher interest rates are expected to negatively impact ad spending [3]. Regulatory Environment - Increased regulatory pressure is affecting industry participants, particularly in China and the EU, with regulations on direct advertising and data protection adding to operational challenges [4]. Industry Performance - The Zacks Internet - Content industry ranks 53, placing it in the top 21% of over 250 Zacks industries, indicating positive near-term prospects [5]. - The industry has underperformed compared to the S&P 500 and the broader Zacks Computer and Technology sector, with a growth of only 1.5% over the past year [8]. Valuation Metrics - The industry is currently trading at a trailing 12-month price-to-sales ratio of 6.10X, slightly below the S&P 500's 6.27X and the sector's 6.86X [9]. Notable Companies - Yelp: Benefiting from higher ad spending and improved customer retention, with a 2024 earnings estimate increase of 11.5% to $1.65 per share [10]. - Angi: Experiencing growth from programmatic ad rates and digital licensing, with a 2024 earnings estimate increase of 12.8% to $0.88 per share [12]. - Opera Limited: Strong advertising business and user growth, with a 2024 earnings estimate increase of 12.8% to $0.88 per share [14][15].