Whether it be online shopping or social media, secular forces are propelling consumer internet businesses forward. This influence cuts both ways though because they have high exposure to the ups and downs of consumer spending, and uncertainty surrounding this factor has capped the industry’s returns - over the past six months, its 7.6% gain has lagged the S&P 500 by 4 percentage points.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one resilient internet stock at the top of our wish list and two that may face trouble.
Two Consumer Internet Stocks to Sell:
Chewy (CHWY)
Market Cap: $9.84 billion
Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE:CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.
Why Are We Wary of CHWY?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 7.1% over the last three years was below our standards for the consumer internet sector
- Anticipated sales growth of 6.8% for the next year implies demand will be shaky
- Gross margin of 29.6% is below its competitors, leaving less money to invest in areas like marketing and R&D
Chewy’s stock price of $24.02 implies a valuation ratio of 10.7x forward EV/EBITDA. To fully understand why you should be careful with CHWY, check out our full research report (it’s free).
Wayfair (W)
Market Cap: $14.73 billion
Founded in 2002 by Niraj Shah, Wayfair (NYSE:W) is a leading online retailer of mass-market home goods in the US, UK, Canada, and Germany.
Why Is W Not Exciting?
- Value proposition isn’t resonating strongly as its active customers averaged 2.2% drops over the last two years
- Projected sales growth of 7.2% for the next 12 months suggests sluggish demand
- Gross margin of 30% reflects its high servicing costs
Wayfair is trading at $108.01 per share, or 18.9x forward EV/EBITDA. If you’re considering W for your portfolio, see our FREE research report to learn more.
One Consumer Internet Stock to Buy:
Pinterest (PINS)
Market Cap: $13.23 billion
Created with the idea of virtually replacing paper catalogues, Pinterest (NYSE: PINS) is an online image and social discovery platform.
What Makes PINS Stand Out?
- Monthly Active Users are rising, meaning the company can increase revenue without incurring additional customer acquisition costs if it can cross-sell additional products and features
- Share repurchases over the last three years enabled its annual earnings per share growth of 36.4% to outpace its revenue gains
- Robust free cash flow margin of 27.5% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute
At $23.44 per share, Pinterest trades at 9.3x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
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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.