Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. The new habits they’re cultivating are also unlocking the next leg of growth for the industry, which has gained 1.6% over the past six months. Investing here would have been wise - at the same time, the S&P 500 fell by 2%.
Although these companies have produced results, only those with the widest moats will survive as emerging red-hot players pop up regularly to take their slice of the pie. Keeping that in mind, here are two resilient internet stocks at the top of our wish list and one we’re swiping left on.
One Consumer Internet Stock to Sell:
The RealReal (REAL)
Market Cap: $663.9 million
Founded by consignment store aficionado Julie Wainwright, The RealReal (NASDAQ: REAL) is an online marketplace for buying and selling secondhand luxury goods.
Why Are We Wary of REAL?
- Intense competition is diverting traffic from its platform as its active buyers fell by 7.7% annually
- Cash-burning history makes us doubt the long-term viability of its business model
- 23× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
The RealReal is trading at $5.81 per share, or 22.9x forward EV/EBITDA. To fully understand why you should be careful with REAL, check out our full research report (it’s free).
Two Consumer Internet Stocks to Watch:
Lyft (LYFT)
Market Cap: $5.24 billion
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Are We Positive On LYFT?
- Active Riders have grown by 10% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Additional sales over the last three years increased its profitability as the 42.5% annual growth in its earnings per share outpaced its revenue
- Free cash flow margin jumped by 18.9 percentage points over the last few years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Lyft’s stock price of $12.42 implies a valuation ratio of 10.6x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free.
Robinhood (HOOD)
Market Cap: $41.14 billion
With a mission to democratize finance, Robinhood (NASDAQ: HOOD) is an online consumer finance platform known for its commission-free stock and crypto trading.
Why Is HOOD a Good Business?
- Customers are spending more money on its platform as its average revenue per user has increased by 43.1% annually over the last two years
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 41.2% over the last three years outstripped its revenue performance
- Free cash flow margin increased by 1,104 percentage points over the last few years, giving the company more capital to invest or return to shareholders
At $45.88 per share, Robinhood trades at 21.2x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
