The growing use of the Internet, coupled with increasing digitalization, has strengthened the Internet services sector. Given this backdrop, let’s analyze whether internet services stocks Global-E Online (GLBE) and Wix.com (WIX) are worth buying now. Continue reading….
The growing need for fast and effective connectivity has positioned the Internet services industry for significant growth. In this context, Internet services operate Wix.com Ltd. (WIX) it could be a wise addition to the portfolio, given its solid profitability. On the contrary, it would be best to avoid Global-E Online Ltd. (GLBE), given its weak fundamentals.
Before we delve 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 used the Internet, which is 66.2% of the world population. Over the last year, Internet users grew by 1.8%, with around 97 million new users using online platforms for the first time. This growing adoption of the Internet should bode well for the industry.
Consumers are expected to purchase more products social media directly in 2024 than from third-party websites and brand websites. The growing trend of online shopping has increased use of the internet and smartphones have given a notable boost to the Internet services market.
Furthermore, the digital revolution worldwideboosted by the adoption of wireless technology, it promises greater productivity and cost savings, fueling substantial growth in Internet services.
Furthermore, growing trends such as 5G, blockchain, AR, AI and cloud services have had an impact on the Internet services market and are expected to continue growing in the coming years. As a result, the global Internet services market is expected to reach 733.79 billion dollarsrecording a CAGR of 4.4% to 2031.
With these favorable trends in mind, let’s delve into the fundamentals of the two Internet – Services selection of securities, starting from the weakest ones from an investment point of view.
Action no. 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 United States and internationally.
GLBE last 12 months asset turnover ratio of 0.48x is 51.7% lower than the industry average of 1x. Likewise, 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 ended December 31, 2023, GLBE’s revenue and non-GAAP gross profit stood at $185.40 million and $79.12 million, respectively. Additionally, its adjusted EBITDA came in at $35.18 million.
For the same quarter, net loss attributable to common stockholders and basic and adjusted net loss per share attributable to common stockholders were $22.10 million and $0.13, respectively. As of December 31, 2023, GLBE’s accumulated deficit increased 41.4% year-over-year to $456.85 million.
The Street expects GLBE’s revenue and EPS in the fiscal first quarter ended March 2024 to be $141.69 million and $0.10, respectively.
The stock fell 16.8% over the past month to close the latest trading session at $34.11. In the last three months it has decreased by 14.4%.
GLBE’s grim fundamentals are reflected in his own POWR Ratings. The stock has an overall rating of D, equivalent to Sell in our proprietary rating system. POWR Ratings are calculated by considering 118 distinct factors, each optimally weighted.
The stock has a grade of F for Value and a D for Stability. Inside class D Internet – Services sector, is in 22nd place out of 28 stocks.
To view additional POWR Growth, Momentum, Sentiment, and Quality Ratings for GLBE, Click here.
Action no. 1: Wix.com Ltd. (WIX)
Headquartered in Tel Aviv, Israel, WIX develops and markets a cloud-based platform that allows you to build a website or web application in North America, Europe, Latin America, Asia and internationally.
Recently, WIX announced changes to the Israeli Corporate Regulations, which eliminate the requirement to obtain mandatory Israeli court approval for share repurchases for companies that would otherwise be required to obtain such approval. The relief regulations will streamline the regulatory approvals required for share repurchases, allowing WIX to accelerate its ability to begin executing share repurchase activity.
As previously announced, WIX is in the process of obtaining the necessary approvals required by 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 the addition of three new providers: Airpay, Easebuzz and Nimbbl, enhancing WIX’s offerings to its Indian merchants and providing more options to users. Additionally, two more providers, Razorpay and Cashfree, have regained Reserve Bank of India (RBI) approval, allowing them to welcome new users again.
These providers offer a range of features and capabilities tailored to different 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 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 ended December 31, 2023, WIX’s non-GAAP revenue and gross profit stood at $403.77 million and $282.01 million, up 13.7% and $282.01 million, respectively. 21.8% on an annual basis. Additionally, its free cash flow increased 108.3% from the prior-year quarter to $80.39 million.
For the same quarter, non-GAAP net income and non-GAAP net income per share were $74.04 million and $1.22, up 107.8% and 100%, respectively, from same quarter of the previous year.
Street expects WIX’s revenue and EPS for the fiscal first quarter ended March 2024 to increase 11.7% and 16.1% year-over-year to $417.70 million and $1.06, respectively. The company has surpassed consensus estimates for revenue and EPS in each of the trailing four quarters, which is impressive.
The stock gained 62.9% over the past nine months to close the latest trading session at $138.52. In the last year it has gained 55.2%.
WIX’s strong outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equivalent to Buy in our proprietary rating system.
WIX has an A grade for growth and a B for sentiment. It is ranked 4th in the same sector.
Click here for additional POWR ratings for WIX (value, momentum, stability, and quality).
What to do next?
Steve Reitmeister, a 43-year investing veteran, just released his 2024 market outlook along with his trading plan and 11 top picks for the year ahead.
Stock Market Outlook 2024 >
WIX shares were unchanged in premarket trading Tuesday. Year to date, WIX has gained 12.60%, compared to a 7.90% increase in the benchmark S&P 500 index over the same period.
About the author: Neha Panjwani
Since her school days, Neha had a deep fascination for finance, a passion that drove her towards a career as an investment analyst after completing her bachelor’s degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her understanding of investment fundamentals. Neha’s primary objective is to help retail investors identify optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. She is committed to empowering people to make informed and strategic investment decisions in the dynamic world of finance.
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