Whether it be online shopping or social media, secular forces are propelling consumer internet businesses forward. But it’s not all sunshine and rainbows as consumer purchasing power can make or break demand. This unpredictability is weighing on the industry as its 4.6% return over the past six months has fallen short of the S&P 500’s 13.1% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one internet stock boasting a durable advantage and two we’re swiping left on.
Two Consumer Internet Stocks to Sell:
Wayfair (W)
Market Cap: $13.71 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 Do We Think Twice About W?
- Struggled with new customer acquisition as its active customers averaged 1.8% declines
- Projected sales growth of 5.2% for the next 12 months suggests sluggish demand
- High servicing costs result in an inferior gross margin of 30.2% that must be offset through higher volumes
At $110.42 per share, Wayfair trades at 17.3x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than W.
Chegg (CHGG)
Market Cap: $103.4 million
Started as a physical textbook rental service, Chegg (NYSE:CHGG) is now a digital platform addressing student pain points by providing study and academic assistance.
Why Do We Steer Clear of CHGG?
- Intense competition is diverting traffic from its platform as its services subscribers fell by 21.7% annually
- Overall productivity fell over the last few years as its plummeting sales were accompanied by a decline in its EBITDA margin
- Sales were less profitable over the last three years as its earnings per share fell by 45.3% annually, worse than its revenue declines
Chegg’s stock price of $0.89 implies a valuation ratio of 2.1x forward EV/EBITDA. Check out our free in-depth research report to learn more about why CHGG doesn’t pass our bar.
One Consumer Internet Stock to Buy:
Duolingo (DUOL)
Market Cap: $7.97 billion
Founded by a Carnegie Mellon computer science professor and his Ph.D. student, Duolingo (NASDAQ:DUOL) is a mobile app helping people learn new languages.
Why Are We Backing DUOL?
- Has the opportunity to boost monetization through new features and premium offerings as its monthly active users have grown by 33.1% annually over the last two years
- Additional sales over the last three years increased its profitability as the 259% annual growth in its earnings per share outpaced its revenue
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its growing cash flow gives it even more resources to deploy
Duolingo is trading at $173.41 per share, or 23.6x forward EV/EBITDA. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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