Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. This influence cuts both ways though because they have high exposure to the ups and downs of consumer spending, and the market seems to believe the tide is turning in the wrong direction - over the past six months, the industry has tumbled by 29.6%. This performance was noticeably worse than the S&P 500’s 1.9% loss.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here is one internet stock poised to generate sustainable market-beating returns and two we’re passing on.
Two Consumer Internet Stocks to Sell:
Udemy (UDMY)
Market Cap: $690.8 million
With courses ranging from investing to cooking to computer programming, Udemy (NASDAQ: UDMY) is an online learning platform that connects learners with expert instructors who specialize in a wide range of topics.
Why Do We Think Twice About UDMY?
- Value proposition isn’t resonating strongly as its monthly active buyers averaged 56.2% drops over the last two years
- Estimated sales growth of 2% for the next 12 months implies demand will slow from its three-year trend
- Highly competitive market means it’s on the never-ending treadmill of sales and marketing spend
Udemy is trading at $4.75 per share, or 3.3x forward EV/EBITDA. If you’re considering UDMY for your portfolio, see our FREE research report to learn more.
ACV Auctions (ACVA)
Market Cap: $837.3 million
Founded in 2014, ACV Auctions (NASDAQ: ACVA) is an online auction marketplace for car dealers and wholesalers to buy and sell used cars.
Why Are We Cautious About ACVA?
- High servicing costs result in an inferior gross margin of 27.1% that must be offset through higher volumes
- Expensive marketing campaigns hurt its profitability and make us wonder what would happen if it let up on the gas
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $4.82 per share, ACV Auctions trades at 9.9x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than ACVA.
One Consumer Internet Stock to Watch:
Snap (SNAP)
Market Cap: $7.62 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 Do We Like SNAP?
- Excellent EBITDA margin of 10.6% highlights the efficiency of its business model, and its operating leverage amplified its profits over the last few years
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 27.9% outpaced its revenue gains
- Free cash flow margin increased by 6.2 percentage points over the last few years, giving the company more capital to invest or return to shareholders
Snap’s stock price of $4.52 implies a valuation ratio of 8.6x forward EV/EBITDA. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
