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2 Internet Stocks for Long-Term Investors and 1 We Question
Whether it be online shopping or social media, secular forces are propelling consumer internet businesses forward. These themes have enabled solid growth for the industry, which has posted a 14% gain over the past six months. This return was on par with the S&P 500.
Nevertheless, investors should tread carefully as many internet companies pursue winner-take-all strategies, meaning losses can be hefty if their playbooks don’t pan out. With that said, here are two internet stocks we think can generate sustainable market-beating returns and one we would avoid.
One Consumer Internet Stock to Sell:
Upwork (UPWK)
Market Cap: $1.09 billion
Formed through the 2013 merger of Elance and oDesk, Upwork (NASDAQ:UPWK) is an online platform where businesses and independent professionals connect to get work done.
Why Are We Hesitant About UPWK?
- Annual revenue growth of 6.6% over the last three years was below our standards for the consumer internet sector
- Projected sales decline of 8.8% for the next 12 months points to a tough demand environment ahead
At $8.60 per share, Upwork trades at 4.1x forward EV/EBITDA. To fully understand why you should be careful with UPWK, check out our full research report (it’s free).
Two Consumer Internet Stocks to Buy:
Snap (SNAP)
Market Cap: $9.88 billion
Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.
Why Are We Bullish on SNAP?
- Healthy EBITDA margin of 13.2% shows it’s a well-run company with efficient processes, and it turbocharged its profits by achieving some fixed cost leverage
- Incremental sales over the last three years have been highly profitable as its earnings per share increased by 36.4% annually, topping its revenue gains
- Free cash flow margin jumped by 9.3 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Snap’s stock price of $5.83 implies a valuation ratio of 7.5x forward EV/EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Netflix (NFLX)
Market Cap: $334.4 billion
Launched by Reed Hastings as a DVD mail rental company until its famous pivot to streaming in 2007, Netflix (NASDAQ: NFLX) is a pioneering streaming content platform.
Why Is NFLX a Top Pick?
- Global Streaming Paid Memberships have grown by 15.1% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Excellent EBITDA margin of 31.2% highlights the efficiency of its business model, and its operating leverage amplified its profits over the last few years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 50% exceeded its revenue gains over the last three years
Netflix is trading at $80.10 per share, or 18.1x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.