Internet Stocks: A Valuation Update

This post is a quick update on data that I maintain on price/sales (P/S) ratios on select internet stocks. I periodically refresh the data (semi-automated with links into a spreadsheet) then add the latest data to a chart, which is starting to get crowded.

Changing Ranks
A few things have changed since the last update in December. Facebook (FB) has fallen from #2 to #5. Zillow (Z) has muscled its way to the #2 slot. Several stocks that already had high values (P/S above 6) have made large gains: Open Table (OPEN), TripAdvisor (TRIP), Yelp (YELP) and Zillow. At the lower end, the most notable changes are the drops in MeetMe (MEET) and Milennial Media (MM). Velti (VELT) has plunged to dead last.

Many things have not changed. LinkedIn (LNKD) remains #1. Amazon’s (AMZN) valuation is unchanged (surprisingly). The crowded middle of internet stocks valued from 2 to 5 is just as crowded although some new members have entered the club: Comscore (SCOR) and Shutterfly (SFLY).

Overall, this group of stocks has done very well in 2013. Facebook is a notable exception hitting fresh lows for the year two weeks ago and trading down 8.9% year-to-date.

Buy The Dips
While I do not see any screaming values, I think this group of winners provides a ripe field for buying on dips. I am now particularly focused on Google (GOOG) (reported in my T2108 Updates). I am long overdue for an update on Groupon (GRPN). Way back in December, I identified it as a “January play.” It did well, and it continues to do well. The stock has long left a bottom behind, but I have yet to develop a new opinion on how far it can go. Note well that before December I was incredibly bearish on the company, to the point I was convinced it would not survive another year. Zynga (ZNGA) and MM are my disasters of the group. ZNGA in particular deserves a requiem in a blog post one day soon as one of my worst picks of last year. Finally, I have successfully traded in and out of stocks like OPEN, TRIP, Z and Angie’s List (ANGI), wishing I never sold!