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2 Internet Content Stocks to Watch From a Challenging Industry
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The Zacks Internet - Content industry has been suffering from challenging macroeconomic conditions globally, which is having a detrimental effect on ad spending, the primary revenue source for the industry participants. The ongoing war between Russia and Ukraine, as well as that in the Middle East, has been an overhang on the prospects of the industry participants. However, industry participants are benefiting from solid demand for digital offerings, as well as the increasing importance of video content and cloud-based applications. The proliferation of AI and the rapid deployment of Generative AI (Gen AI) are aiding industry players. Participants like Yelp (YELP - Free Report) and Opera Limited (OPRA - Free Report) are expanding their presence across social media, display and connected TV and search, driving top-line growth.
Industry Description
The Zacks Internet - Content industry comprises providers of video encoding platforms, personal services, Internet content and information, staffing and outsourcing services, publishing, capital markets, media-based, home service, digital insights and measurement, stock photo, video and music licensing, and online travel companies. The industry is witnessing a rapid change in consumer behavior and ongoing digitalization. Advertising is a major revenue source for industry participants. Therefore, these companies are trying to expand their digital presence to win customers. They are also expanding their presence across social media, display and connected TV and search. Apart from the United States, a number of companies in this industry are located in Israel, the U.K., Germany, Russia and China.
3 Trends Shaping the Future of the Internet - Content Industry
Demand for Digital Offerings Growing: The industry is characterized by rapid technological change, frequent product and service introductions, and evolving standards. An expanding range of mobile, digital and cloud-based offerings by industry participants is a major growth driver. The proliferation of smart devices and the increasing automation of the application development process bode well.
Industry Prospects Driven by Ad Spending Rate: Industry participants are focusing on marketing efforts to boost traffic to websites. Advertising and subscriptions are major revenue sources for these companies. Also, the industry is dependent on consumer spending trends, making holiday spending a major deciding factor. However, macroeconomic challenges, persistent inflation and higher interest rates are expected to hurt ad spending in the near term.
Increasing Regulations Mar Prospects: Industry participants involved in online search and other social networking activities are increasingly facing regulatory pressure, particularly in China and the European Union (“EU”). The China government has a number of regulations related to direct advertising, which is a prime revenue source for these companies. The implementation of the General Data Protection Regulation, which took effect on May 25, 2018, in the EU, adds to the concerns. Enactment of the Digital Markets Act (DMA) in the EU aims to prevent large online platforms that connect users with content, goods, information and services from abusing their market power. The DMA adds to the headwinds faced by Internet content providers in the EU.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Internet - Content industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #194, which places it in the bottom 21% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2024, the Zacks Consensus Estimate for the industry’s 2025 earnings has moved down 2.8%.
Given the dull industry outlook, there are only a few stocks worth buying. But before we present the stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and valuation.
Industry Lags S&P and Sector
The Zacks Internet - Content industry has underperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 composite, over the past year.
The industry has returned 6.1% over this period compared with the S&P 500 sector’s appreciation of 18.1% and the 25.3% rise of the broader sector.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Internet – Content stocks, we see that the industry is currently trading at 6.49X compared with the S&P 500’s 5.62X and the sector’s 8.31X.
Over the last five years, the industry has traded as high as 7.41X and as low as 5.9X, the median being 6.45X, as the charts below show.
Yelp’s continued investment in AI and machine learning is expected to drive higher engagement and loyalty on its platform, contributing to sustained revenue growth. The company is witnessing an acceleration in consumer traffic across app-unique devices.
The Zacks Consensus Estimate for YELP’s 2025 earnings has declined a couple of cents to $2.10 per share over the past 30 days. Yelp shares have declined 20.9% year to date.
Price & Consensus: YELP
Opera Limited: Another Zacks Rank #3 stock, the company is benefiting from growing search revenues, up 8% year over year, in the first quarter of 2025. Opera is leveraging AI to effectively identify the target audience, delivering simultaneous growth in search and advertising. Stable monthly active user base, 293 million at the end of the first quarter of 2025, bodes well for OPRA’s prospects.
While the company is emphasizing innovation through products like Opera Air and updates to Opera One and GX, the ability of these offerings to drive sustainable user growth is uncertain, given a challenging macroeconomic environment.
The Zacks Consensus Estimate for OPRA’s 2025 earnings has been steady at $1.18 per share over the past 30 days. Opera shares have plunged 17.1% in the year-to-date period.
Price & Consensus: OPRA
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2 Internet Content Stocks to Watch From a Challenging Industry
The Zacks Internet - Content industry has been suffering from challenging macroeconomic conditions globally, which is having a detrimental effect on ad spending, the primary revenue source for the industry participants. The ongoing war between Russia and Ukraine, as well as that in the Middle East, has been an overhang on the prospects of the industry participants. However, industry participants are benefiting from solid demand for digital offerings, as well as the increasing importance of video content and cloud-based applications. The proliferation of AI and the rapid deployment of Generative AI (Gen AI) are aiding industry players. Participants like Yelp (YELP - Free Report) and Opera Limited (OPRA - Free Report) are expanding their presence across social media, display and connected TV and search, driving top-line growth.
Industry Description
The Zacks Internet - Content industry comprises providers of video encoding platforms, personal services, Internet content and information, staffing and outsourcing services, publishing, capital markets, media-based, home service, digital insights and measurement, stock photo, video and music licensing, and online travel companies. The industry is witnessing a rapid change in consumer behavior and ongoing digitalization. Advertising is a major revenue source for industry participants. Therefore, these companies are trying to expand their digital presence to win customers. They are also expanding their presence across social media, display and connected TV and search. Apart from the United States, a number of companies in this industry are located in Israel, the U.K., Germany, Russia and China.
3 Trends Shaping the Future of the Internet - Content Industry
Demand for Digital Offerings Growing: The industry is characterized by rapid technological change, frequent product and service introductions, and evolving standards. An expanding range of mobile, digital and cloud-based offerings by industry participants is a major growth driver. The proliferation of smart devices and the increasing automation of the application development process bode well.
Industry Prospects Driven by Ad Spending Rate: Industry participants are focusing on marketing efforts to boost traffic to websites. Advertising and subscriptions are major revenue sources for these companies. Also, the industry is dependent on consumer spending trends, making holiday spending a major deciding factor. However, macroeconomic challenges, persistent inflation and higher interest rates are expected to hurt ad spending in the near term.
Increasing Regulations Mar Prospects: Industry participants involved in online search and other social networking activities are increasingly facing regulatory pressure, particularly in China and the European Union (“EU”). The China government has a number of regulations related to direct advertising, which is a prime revenue source for these companies. The implementation of the General Data Protection Regulation, which took effect on May 25, 2018, in the EU, adds to the concerns. Enactment of the Digital Markets Act (DMA) in the EU aims to prevent large online platforms that connect users with content, goods, information and services from abusing their market power. The DMA adds to the headwinds faced by Internet content providers in the EU.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Internet - Content industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #194, which places it in the bottom 21% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Nov. 30, 2024, the Zacks Consensus Estimate for the industry’s 2025 earnings has moved down 2.8%.
Given the dull industry outlook, there are only a few stocks worth buying. But before we present the stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and valuation.
Industry Lags S&P and Sector
The Zacks Internet - Content industry has underperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 composite, over the past year.
The industry has returned 6.1% over this period compared with the S&P 500 sector’s appreciation of 18.1% and the 25.3% rise of the broader sector.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Internet – Content stocks, we see that the industry is currently trading at 6.49X compared with the S&P 500’s 5.62X and the sector’s 8.31X.
Over the last five years, the industry has traded as high as 7.41X and as low as 5.9X, the median being 6.45X, as the charts below show.
Trailing 12-Month Price-to-Sales (P/S) Ratio
2 Internet Stocks to Watch
Yelp: This Zacks Rank #3 (Hold) company is benefiting from higher ad spending, an increase in Paying Advertising Locations and an improvement in the non-term customer retention rate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Yelp’s continued investment in AI and machine learning is expected to drive higher engagement and loyalty on its platform, contributing to sustained revenue growth. The company is witnessing an acceleration in consumer traffic across app-unique devices.
The Zacks Consensus Estimate for YELP’s 2025 earnings has declined a couple of cents to $2.10 per share over the past 30 days. Yelp shares have declined 20.9% year to date.
Price & Consensus: YELP
Opera Limited: Another Zacks Rank #3 stock, the company is benefiting from growing search revenues, up 8% year over year, in the first quarter of 2025. Opera is leveraging AI to effectively identify the target audience, delivering simultaneous growth in search and advertising. Stable monthly active user base, 293 million at the end of the first quarter of 2025, bodes well for OPRA’s prospects.
While the company is emphasizing innovation through products like Opera Air and updates to Opera One and GX, the ability of these offerings to drive sustainable user growth is uncertain, given a challenging macroeconomic environment.
The Zacks Consensus Estimate for OPRA’s 2025 earnings has been steady at $1.18 per share over the past 30 days. Opera shares have plunged 17.1% in the year-to-date period.
Price & Consensus: OPRA