4 Internet Stocks Set To Beat Estimates In Q2 Earnings

Internet stocks are expected to put up a solid performance in second-quarter 2019, thanks to increasing usage of social media platforms, digital advertising growth, adoption of online payment methods, expanding online delivery modes and strong e-commerce growth.

Moreover, Internet stocks are benefiting from an expanding user base, rapid adoption of cloud computing, improving Internet speed and penetration, rapid adoption of 4G Volte technology, augmented/virtual reality and increasing demand for over-the-top videos.

A Sneak Peak Into Few Top Releases

Internet giants like Alphabet (NASDAQ:GOOGL) , Facebook (NASDAQ:FB) , Snap, Twitter, PayPal and others reported terrific second-quarter 2019 results.

Strength in advertising revenues and robust Google cloud growth (annual revenue run rate of more than $8 billion) drove Alphabet’s earnings results.

Facebook, Google’s closest competitor in the advertising space, benefited from an expanding user base in the Asia-Pacific region, strong mobile ad growth and Instagram strength.

While Twitter benefited from a lower abuse rate and improvement in user safety, Snap gained from the newly-launched augmented lenses as well as premium content.

Notably, Snap’s user base expanded a solid 13 million sequentially driven by improving user engagement. The company’s results indicated that demand for video content over social media platforms is on the rise.

Growth Drivers Aplenty

Shift in consumer preference, driven by convenience and easy accessibility, is a major growth driver for Internet-based stocks. Further, rapid adoption of cloud computing, cloud-based gaming, wearables and drones is expected to be another driving factor.

The omnipresence of Internet has aided companies with a wealth of information provided by their users. Notably, per recent IDC estimates, the global datasphere will grow to 175 zettabytes (that is a trillion gigabytes) by 2025, from 33 zettabytes in 2018. The secular growth trend in data is helping companies infuse AI and machine and deep learning into their solutions.

Moreover, real-time analysis of user data supported by AI tools is helping advertisers target the right audience, which is boosting their Return on Investment. Additionally, focus on video streaming has been driving user engagement that is attracting advertising dollars.

Proliferation of IoT, which is facilitating connected devices and smart homes, is also a key catalyst. The accelerated deployment of 5G technology — the next-generation of wireless connectivity — is also likely to spur growth.

How to Make the Right Pick?

With the existence of a number of industry players, finding the right Internet stocks that have the potential to beat earnings estimates can be laborious. Our proprietary methodology, however, makes it fairly simple.

You could narrow down the list of choices by looking at stocks that have the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP is our proprietary methodology for determining stocks, which have the best chances to surprise with their next earnings announcement. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Our Choices

Here are four Internet stocks that have the winning combination:

Holmdel, NJ-based Vonage Holdings (NYSE:VG) is set to report second-quarter 2019 results on Aug 6. The company has an Earnings ESP of +47.37% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for earnings has been steady at 3 cents over the past 30 days.

San Francisco, CA-based Zendesk (NYSE:ZEN) has a Zacks Rank #2 and an Earnings ESP of +7.84%. The company is scheduled to report second-quarter 2019 results on Jul 30.

The consensus mark for earnings has stayed at 5 cents over the past 30 days.

Chicago, IL-based Grubhub (NYSE:GRUB) has a Zacks Rank #3 and an Earnings ESP of +12.04%.

The company is scheduled to report second-quarter 2019 results on Jul 30. The consensus mark for earnings has been stable at 30 cents over the past month.

Grubhub Inc. Price and EPS Surprise

Seattle, WA-based Zillow Group (NASDAQ:ZG) has a Zacks Rank #3 and an Earnings ESP of +32.04%.

The company is set to report second-quarter 2019 results on Aug 7. The consensus mark for loss has improved by a penny to 15 cents over the past 30 days.

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