Chicago, IL – February 26, 2025 – Today, Zacks Equity Research discusses RELX RELX, Genius Sports Ltd. GENI and Shutterstock SSTK.
Industry: Internet Content
Link: https://www.zacks.com/commentary/2421305/3-red-hot-stocks-to-acquire-from-a-prospering-internet-industry
The Zacks Internet - Content industry is benefiting from solid demand for digital offerings, as well as the increasing importance of video content and cloud-based applications. The proliferation of AI and rapid deployment of Generative AI (Gen AI) are aiding industry players. Participants like RELX, Genius Sports Ltd. and Shutterstock are expanding their presence across social media, display and connected TV, and search, driving top-line growth.
However, the industry has been suffering from challenging macroeconomic conditions globally. Persistent inflation and higher interest rates are having a detrimental effect on ad spending — the primary revenue source for the industry participants. The ongoing war between Russia and Ukraine, as well as that in the Middle East, has been an overhang on the prospects of the industry participants.
The Zacks Internet - Content industry comprises providers of video encoding platforms, personal services, Internet content and information, staffing and outsourcing services, publishing, capital markets, media-based, home service, digital insights and measurement, stock photo, video and music licensing, and online travel companies. The industry is witnessing a rapid change in consumer behavior and ongoing digitalization.
Advertising is a major revenue source for industry participants. Therefore, these companies are trying to expand their digital presence to win customers. They are also expanding their presence across social media, display and connected TV and search. Apart from the United States, a number of companies in this industry are located in Israel, the U.K., Germany, Russia and China.
Demand for Digital Offerings Growing: The industry is characterized by rapid technological change, frequent product and service introductions, and evolving standards. An expanding range of mobile, digital and cloud-based offerings by industry participants is a major growth driver. The proliferation of smart devices and increasing automation of the application development process bodes well.
Industry Prospects Driven by Ad Spending Rate: Industry participants are focusing on marketing efforts to boost traffic to websites. Advertising and subscriptions are major revenue sources for these companies. Also, the industry is dependent on consumer spending trends, making holiday spending a major deciding factor. However, macroeconomic challenges, persistent inflation and higher interest rates are expected to hurt ad spending in the near term.
Increasing Regulations Mar Prospects: Industry participants involved in online search and other social networking activities are increasingly facing regulatory pressure, particularly in China and the European Union (“EU”). The China government has a number of regulations related to direct advertising, which is a prime revenue source for these companies.
The implementation of the General Data Protection Regulation, which took effect on May 25, 2018, in the EU, adds to the concerns. Enactment of the Digital Markets Act (DMA) in the EU aims to prevent large online platforms that connect users with content, goods, information and services from abusing their market power. The DMA adds to the headwinds faced by Internet content providers in the EU.
The Zacks Internet - Content industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #56, which places it in the top 23% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright 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 two to one.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Dec. 31, 2024, the Zacks Consensus Estimate for the industry’s 2025 earnings has moved up 1.7%.
Given the bright industry outlook, there are currently a number of stocks worth buying. But before we present the stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and valuation.
The Zacks Internet - Content industry has underperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 composite over the past year.
The industry has returned 21.6% over this period compared with 33.4% growth of the S&P 500 and the 38.4% rise of the broader sector.
On the basis of the trailing 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Internet – Content stocks, we see that the industry is currently trading at 32.14X compared with the S&P 500’s 5.27X and the sector’s 7.72X.
Over the last five years, the industry traded as high as 32.47X and as low as 14.54X, the median being 20.96X.
Shutterstock: This Zacks Rank #1 (Strong Buy) company is benefiting from an expanding clientele and the Envato acquisition. You can seethe complete list of today’s Zacks #1 Rank stocks here.
Strong demand for Shutterstock’s AI-generated content has been a key catalyst. The launch of Generative Plus, which is a low-cost, month-to-month subscription specific to the licensing of AI-generated Content, is expected to drive top-line growth. The Zacks Consensus Estimate for SSTK’s 2025 earnings has been unchanged at $4.84 per share over the past 30 days.
This New York-based company’s shares have lost 19.3% year to date.
RELX: This Zacks Rank #2 (Buy) company is benefiting from strong demand for Financial Crime Compliance, and Digital Fraud and Identity Solutions. Protégé — RELX’s recently launched next-generation Gen AI legal assistant — has been gaining traction.
The Zacks Consensus Estimate for RELX’s 2025 earnings has increased 4.3% to $1.68 per share over the past 30 days.
RELX shares have appreciated 8.3% year to date.
Genius Sports: This London-based company is benefiting from a strong clientele by inking commercial terms with every major U.S. Sportsbook customer, along with several major sportsbooks outside of the United States.
The Zacks Consensus Estimate for this Zacks Rank #2 company’s 2025 earnings has been unchanged at 1 cent per share over the past 30 days.
GENI shares have appreciated 1% in the year-to-date period.
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