Persistent macroeconomic uncertainties, protracted inflationary conditions and still-high interest rates are challenges for many players within the Zacks Internet - Delivery Services industry. Moreover, elevated operating expenses related to hiring new employees and sales and marketing strategies to capture more market share are likely to strain margins in the near term. Additionally, as expansion into newer markets will take some time to generate volumes, higher upfront costs might erode profitability.
Despite these challenges, industry participants like GoDaddy, Vipshop Holdings, MakeMyTrip and Asure Software are strategically positioned for growth due to their sustained efforts toward adopting changing consumer preferences. A greater Internet presence in emerging markets, a burgeoning affluent middle class and the accelerated uptake of smartphones are set to aid Internet – Delivery Services industry participants. Online delivery is yet to expand beyond major metros, underlining lower penetration and significant room for growth.
Industry Description
The Zacks Internet - Delivery Services industry primarily comprises companies that offer services via Internet-based platforms. These include food delivery, online travel booking, direct marketing and media services and web hosting, among others. Some companies in this space offer Internet domain registration and web hosting registration and sell e-business-related software and services.
A few industry participants provide air and train ticket bookings, customized holiday packages, hotel booking, bus tickets and car hire services. Some players offer online direct marketing and media services, including online messaging, email broadcasting, search engine marketing and brand management facilities. Growth-stage companies in the industry are spending more on R&D and sales & marketing, making it difficult for them to generate profits in the near term.
Trends Shaping the Future of the Internet - Delivery Services Industry
Smartphones & Internet Penetration Act as Key Catalysts: The Internet is ubiquitous, and the heightening usage of smartphones is changing the delivery landscape. The companies in the Zacks Internet - Delivery Services industry are benefiting from the growing number of Internet users, coupled with an improvement in Internet penetration and the rapid adoption of the 4G Volte technology. The emergence of 5G technology, which promises faster speed and deliverability, also bodes well for this industry.
Shifting Consumer Preferences: The shift in consumer preferences, driven by convenience and easy accessibility, is anticipated to aid the industry. The accelerated transition from offline to online food ordering, as well as the rising penetration of online travel booking, augurs well for industry players. However, as the higher consumer spending appetite is the main driver of the overall industry’s health, any sluggishness in the global economy will pose a risk.
Technological Advancements: Advances in technology, including route optimization algorithms, GPS tracking and real-time delivery updates, have enhanced the efficiency and reliability of Internet delivery services. These technological innovations improve delivery accuracy and reduce transit times.
Higher Upfront Costs to Hurt Profitability: Online delivery is yet to expand beyond major metros, underlining lower penetration and significant room for growth. However, higher upfront costs related to expansion strategies might erode profitability. Moreover, Amazon’s focus on strengthening its delivery system is a key challenge for the industry players.
We believe the company’s powerful distribution channels are a major force that might highly threaten incumbents in this industry. Also, the search giant, Alphabet, has forayed into the food delivery market with its delivery arm, Wing, and an array of food delivery apps, which are likely to intensify competition.
Zacks Industry Rank Indicates Dull Prospects
The Internet - Delivery Services industry is housed within the broader Computer and Technology sector. It carries a Zacks Industry Rank #179, which places it among the bottom 29% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically 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 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative aggregate earnings outlook for the constituent companies.
Let’s look at the industry’s performance and current valuation.
Industry Outperforms the S&P 500 and the Sector
The Zacks Internet - Delivery industry has outperformed the S&P 500 composite as well as the broader Zacks Computer and Technology sector over the past year.
The industry has risen 57.8% during this period, while the S&P 500 and the broader sector have advanced 24.5% and 40%, respectively.
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), a commonly used multiple for valuing Internet-Delivery stocks, the industry is currently trading at 1.16X compared with the S&P 500’s 3.86X and the sector’s 4.71X.
Over the past five years, the industry has traded as high as 1.34X and as low as 0.57X and recorded a median of 0.89X.
4 Stocks in Focus
GoDaddy: It is an Internet domain registrar and web hosting company that also sells e-business-related software and services. The company is engaged in designing and developing cloud-based technology products for small businesses, web design professionals and individuals. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GoDaddy is benefiting from strong momentum across the Applications & Commerce business and its expanding global footprint. Strength in Create & Grow solutions is aiding the Application & Commerce segment’s top-line growth. Website plus marketing, driven by greater engagement with customers based on new product launches, is contributing well.
Strong renewals & registrations and the expansion of the GoDaddy Registry are major catalysts. Growth in bookings, primarily driven by strong customer additions and price increases in various domains, has been a key catalyst.
The Zacks Consensus Estimate for 2024 earnings has been revised upward by 16 cents to $4.92 per share over the past 60 days.
Vipshop Holdings: It is an online discount retailer for brands. The company offers branded products to consumers in China through flash sales on its vipshop.com website.
The company’s continued efforts toward strengthening product offerings and improving product procurement are aiding its financial performance, given the growing proliferation of online shopping. Further, the solid execution of its merchandising strategy is bolstering its active customer base. Moreover, its successful transition to discount retailing is a major upside. This is likely to continue driving momentum across repeat customers and help attract new ones.
Additionally, this Zacks Rank #3 company’s quarterly results are likely to keep benefiting from its deepening focus on high-margin-generating apparel-related businesses, especially the discount apparel business. Furthermore, Vipshop’s deep discount channels are expected to bolster its online gross merchandise volumes in the quarters ahead.
The Zacks Consensus Estimate for current-year earnings has been revised a penny downward to $2.54 per share over the past 30 days.
MakeMyTrip: It is an online travel service company that offers travel products and solutions in India and the United States. This Zacks Rank #3 company's services and products include air tickets, customized holiday packages, hotel booking, railway tickets, bus tickets and car hire. It also facilitates access to travel insurance.
MakeMyTrip is gaining substantially from improving travel conditions and the reopening of economies post-pandemic. In addition, recovering hotel demand as a result of the rise in short-stay getaway vacations, great travel deals and hygienically safe properties is a major upside. Also, the company is optimistic about its cost-control initiatives, MySafety and GoSafe programs, and strengthening hotel business.
The Zacks Consensus Estimate for fiscal 2024 earnings has been revised downward to $1.13 per share from $1.17 in the past 60 days.
Asure Software: This is a cloud computing firm that offers business clients the chance to modernize everything from human capital management (HCM) and time & attendance solutions to payroll and taxes. Asure Software’s strategic initiative to become a pure software-as-a-service HCM company is aiding its top-line growth. This Zacks Rank #3 company’s focus on driving innovation for its HCM solutions is helping it expand its footprint in the HCM market.
New client additions and a continued focus on cross-selling to existing clients are driving Asure Software’s revenues. The company’s differentiated employee strategy, measurement capabilities and comprehensive product offerings are helping it win new customers.
The Zacks Consensus Estimate for Asure Software’s 2024 earnings has remained unchanged at 69 cents per share in the past 60 days.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights GoDaddy, Vipshop MakeMyTrip and Asure Software
For Immediate Release
Chicago, IL – May 8 , 2024 – Today, Zacks Equity Research discusses GoDaddy (GDDY - Free Report) , Vipshop Holdings (VIPS - Free Report) , MakeMyTrip (MMYT - Free Report) and Asure Software (ASUR - Free Report) .
Industry: Internet Delivery Services
Link: https://www.zacks.com/commentary/2269505/4-internet-delivery-services-stocks-to-watch-despite-industry-woes
Persistent macroeconomic uncertainties, protracted inflationary conditions and still-high interest rates are challenges for many players within the Zacks Internet - Delivery Services industry. Moreover, elevated operating expenses related to hiring new employees and sales and marketing strategies to capture more market share are likely to strain margins in the near term. Additionally, as expansion into newer markets will take some time to generate volumes, higher upfront costs might erode profitability.
Despite these challenges, industry participants like GoDaddy, Vipshop Holdings, MakeMyTrip and Asure Software are strategically positioned for growth due to their sustained efforts toward adopting changing consumer preferences. A greater Internet presence in emerging markets, a burgeoning affluent middle class and the accelerated uptake of smartphones are set to aid Internet – Delivery Services industry participants. Online delivery is yet to expand beyond major metros, underlining lower penetration and significant room for growth.
Industry Description
The Zacks Internet - Delivery Services industry primarily comprises companies that offer services via Internet-based platforms. These include food delivery, online travel booking, direct marketing and media services and web hosting, among others. Some companies in this space offer Internet domain registration and web hosting registration and sell e-business-related software and services.
A few industry participants provide air and train ticket bookings, customized holiday packages, hotel booking, bus tickets and car hire services. Some players offer online direct marketing and media services, including online messaging, email broadcasting, search engine marketing and brand management facilities. Growth-stage companies in the industry are spending more on R&D and sales & marketing, making it difficult for them to generate profits in the near term.
Trends Shaping the Future of the Internet - Delivery Services Industry
Smartphones & Internet Penetration Act as Key Catalysts: The Internet is ubiquitous, and the heightening usage of smartphones is changing the delivery landscape. The companies in the Zacks Internet - Delivery Services industry are benefiting from the growing number of Internet users, coupled with an improvement in Internet penetration and the rapid adoption of the 4G Volte technology. The emergence of 5G technology, which promises faster speed and deliverability, also bodes well for this industry.
Shifting Consumer Preferences: The shift in consumer preferences, driven by convenience and easy accessibility, is anticipated to aid the industry. The accelerated transition from offline to online food ordering, as well as the rising penetration of online travel booking, augurs well for industry players. However, as the higher consumer spending appetite is the main driver of the overall industry’s health, any sluggishness in the global economy will pose a risk.
Technological Advancements: Advances in technology, including route optimization algorithms, GPS tracking and real-time delivery updates, have enhanced the efficiency and reliability of Internet delivery services. These technological innovations improve delivery accuracy and reduce transit times.
Higher Upfront Costs to Hurt Profitability: Online delivery is yet to expand beyond major metros, underlining lower penetration and significant room for growth. However, higher upfront costs related to expansion strategies might erode profitability. Moreover, Amazon’s focus on strengthening its delivery system is a key challenge for the industry players.
We believe the company’s powerful distribution channels are a major force that might highly threaten incumbents in this industry. Also, the search giant, Alphabet, has forayed into the food delivery market with its delivery arm, Wing, and an array of food delivery apps, which are likely to intensify competition.
Zacks Industry Rank Indicates Dull Prospects
The Internet - Delivery Services industry is housed within the broader Computer and Technology sector. It carries a Zacks Industry Rank #179, which places it among the bottom 29% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically 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 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative aggregate earnings outlook for the constituent companies.
Let’s look at the industry’s performance and current valuation.
Industry Outperforms the S&P 500 and the Sector
The Zacks Internet - Delivery industry has outperformed the S&P 500 composite as well as the broader Zacks Computer and Technology sector over the past year.
The industry has risen 57.8% during this period, while the S&P 500 and the broader sector have advanced 24.5% and 40%, respectively.
Industry's Current Valuation
On the basis of forward 12-month price-to-sales (P/S), a commonly used multiple for valuing Internet-Delivery stocks, the industry is currently trading at 1.16X compared with the S&P 500’s 3.86X and the sector’s 4.71X.
Over the past five years, the industry has traded as high as 1.34X and as low as 0.57X and recorded a median of 0.89X.
4 Stocks in Focus
GoDaddy: It is an Internet domain registrar and web hosting company that also sells e-business-related software and services. The company is engaged in designing and developing cloud-based technology products for small businesses, web design professionals and individuals. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GoDaddy is benefiting from strong momentum across the Applications & Commerce business and its expanding global footprint. Strength in Create & Grow solutions is aiding the Application & Commerce segment’s top-line growth. Website plus marketing, driven by greater engagement with customers based on new product launches, is contributing well.
Strong renewals & registrations and the expansion of the GoDaddy Registry are major catalysts. Growth in bookings, primarily driven by strong customer additions and price increases in various domains, has been a key catalyst.
The Zacks Consensus Estimate for 2024 earnings has been revised upward by 16 cents to $4.92 per share over the past 60 days.
Vipshop Holdings: It is an online discount retailer for brands. The company offers branded products to consumers in China through flash sales on its vipshop.com website.
The company’s continued efforts toward strengthening product offerings and improving product procurement are aiding its financial performance, given the growing proliferation of online shopping. Further, the solid execution of its merchandising strategy is bolstering its active customer base. Moreover, its successful transition to discount retailing is a major upside. This is likely to continue driving momentum across repeat customers and help attract new ones.
Additionally, this Zacks Rank #3 company’s quarterly results are likely to keep benefiting from its deepening focus on high-margin-generating apparel-related businesses, especially the discount apparel business. Furthermore, Vipshop’s deep discount channels are expected to bolster its online gross merchandise volumes in the quarters ahead.
The Zacks Consensus Estimate for current-year earnings has been revised a penny downward to $2.54 per share over the past 30 days.
MakeMyTrip: It is an online travel service company that offers travel products and solutions in India and the United States. This Zacks Rank #3 company's services and products include air tickets, customized holiday packages, hotel booking, railway tickets, bus tickets and car hire. It also facilitates access to travel insurance.
MakeMyTrip is gaining substantially from improving travel conditions and the reopening of economies post-pandemic. In addition, recovering hotel demand as a result of the rise in short-stay getaway vacations, great travel deals and hygienically safe properties is a major upside. Also, the company is optimistic about its cost-control initiatives, MySafety and GoSafe programs, and strengthening hotel business.
The Zacks Consensus Estimate for fiscal 2024 earnings has been revised downward to $1.13 per share from $1.17 in the past 60 days.
Asure Software: This is a cloud computing firm that offers business clients the chance to modernize everything from human capital management (HCM) and time & attendance solutions to payroll and taxes. Asure Software’s strategic initiative to become a pure software-as-a-service HCM company is aiding its top-line growth. This Zacks Rank #3 company’s focus on driving innovation for its HCM solutions is helping it expand its footprint in the HCM market.
New client additions and a continued focus on cross-selling to existing clients are driving Asure Software’s revenues. The company’s differentiated employee strategy, measurement capabilities and comprehensive product offerings are helping it win new customers.
The Zacks Consensus Estimate for Asure Software’s 2024 earnings has remained unchanged at 69 cents per share in the past 60 days.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.