The internet’s global reach offers Internet service providers a limitless market for growth and revenue. Despite undergoing several upheavals last year, including high-interest rates, inflationary pressures, and concerns about a slowing economy, the industry remains the backbone of the digital economy and is poised for long-term success.
Therefore, it could be wise for investors to invest in fundamentally sound internet services stocks Perion Network Ltd. (PERI – Get Rating), Liquidity Services, Inc. (LQDT – Get Rating), and Liberty TripAdvisor Holdings, Inc. (LTRPA – Get Rating) to reap the rewards of global growth and digital dominance.
Deployment of fiber optic networks and 5G technology is on the cards for internet service providers across the globe. Growing competition within this space leads to consolidations, market share improvement, and expansion of capabilities. The global 5G services market is expected to expand at a CAGR of 59.4% from 2023 to 2030.
According to McKinsey, using generative AI and other foundational models will be the game changer, reducing application development time and bringing powerful capabilities to nontechnical users.
As the prevalence of mobile network coverage and mobile internet adoption is on an upward trend, the global internet services market is expected to reach $644.87 billion by 2029, exhibiting a CAGR of 4.4% over the six years.
Moreover, government initiatives are a key driving factor aimed at rapidly developing and growing the internet infrastructure. For instance, the U.S. Department of Commerce announced funding high-speed internet infrastructure deployment, which is a $42.45 billion grant program created in the Bipartisan Infrastructure Law.
As the market expects a favorable turn, investing in fundamentally strong internet service stocks like PERI, LQDT, and LTRPA could help garner substantial returns. Let’s take a close look at these stocks.
Perion Network Ltd. (PERI – Get Rating)
Headquartered in Holon, Israel, PERI is a technology company offering online advertising and searching solutions to brands, agencies, and publishers through desktop, mobile, and social channels. The company operates across the three main pillars of digital advertising – ad search, social media, and display, including video and CTV advertising.
On May 3, backed by its strong performance and sustainability, PERI raised its annual guidance for the current year (fiscal year 2023) ending December 31. The company projects revenue of approximately $725-745 million and adjusted EBITDA above $155 million, up from the prior projection of $149-153 million.
On April 3, PERI announced a significant increase in the adoption of SORT®, its revolutionary solution that prioritizes anonymity and privacy. As the focus on Environmental, Social, and Governance (ESG) initiatives continues to expand, privacy concerns regarding collecting, storing, and utilizing personal data have become even more pronounced among consumers.
According to PERI’s recent survey of SORT® users, 67% of respondents consider privacy-safe solutions crucial for their brand image. This should help attract new customers and outperform other solutions.
In the first quarter (ended March 31, 2023), PERI’s total revenue increased by 15.8% year-over-year to $145.15 million. The company’s income from operations rose 48.5% from the year-ago value to $24.50 million, while its non-GAAP net income stood at $29.20 million, up by 44.2% year-over-year.
In addition, its adjusted EBITDA amounted to $31.27 million, reflecting an increase of 37.9% year-over-year. Also, its non-GAAP EPS increased 36.4% year-over-year to $0.60 in the same period.
Street expects PERI’s revenue to increase 20% year-over-year to $176 million for the second quarter (ended June 30, 2023). Its EPS estimate of $0.45 for the to-be-reported quarter is expected to register an 8.8% year-over-year growth. Moreover, it surpassed the revenue and EPS estimates in each of the four trailing quarters, which is promising.
Its revenue and EPS have increased at CAGRs of 34.1% and 65.8% over the past three years. Also, its levered FCF has grown at a 26.5% CAGR over the same period.
PERI’s trailing-12-month ROTA of 12.70% is 749.6% higher than the industry average of 1.49%. Also, its trailing-12-month net income margin and ROCE of 16.29% and 19.59% are 455.1% and 495.9% higher than the 2.94% and 3.29% industry averages, respectively.
