The internet services industry is anticipating strong long-term growth due to the increasing global demand for high-speed internet connectivity and the digital transformation of various industry verticals. This sets up ContextLogic (WISH) and Alphabet (GOOGL) to benefit significantly from these industry trends. So, which stock is the better buy for June? Read on to find out.
In this article, we will evaluate ContextLogic Inc. (WISH) and Alphabet Inc. (GOOGL) to determine which stock is a better investment option. Based on a fundamental comparison of these stocks, it can be concluded that GOOGL is the better buy, as explained throughout this article.
The internet services industry is poised for robust growth in the future, thanks to the increasing global internet penetration and rapid digitalization of various industry sectors. The internet has had a profound impact on our lives, from communication and education to shopping and entertainment. According to Statista, as of 2023, nearly 92% of the U.S. population had access to the internet, compared to approximately 75% in 2012, with about 299 million internet users in the country.
The global broadband services market size is projected to reach $875.10 billion by 2030, growing at a 9.7% compound annual growth rate (CAGR), according to a report by Grand View Research. This growth is driven by the digital transformation of businesses, which requires uninterrupted broadband connectivity. High-speed internet is crucial for implementing digital technologies and increasing operational efficiency, as well as keeping up with competition. Additionally, the internet industry is expanding rapidly due to the increasing prevalence of online learning, the adoption of remote work strategies by enterprises, and a surge in internet usage for entertainment purposes.
The adoption of advanced wireless technologies, such as 5G, is further fueling the growth of the internet services industry. The global 5G services market size is expected to reach $2.21 trillion by 2030, growing at a 59.4% CAGR, according to another report by Grand View Research.
In terms of price performance, GOOGL has outperformed WISH over the past three months, with a 31.6% return compared to WISH’s 38.2% decline. Over the past six months, GOOGL has gained 30.1%, while WISH has plunged 59.7%. Additionally, GOOGL’s 15.9% gain over the past year is higher than WISH’s decline of 84%.
Here are the reasons why GOOGL is expected to perform better in the near term:
- Latest Developments: WISH recently partnered with ShipSage, an e-commerce fulfillment service provider, to provide U.S. merchants with more options and faster fulfillment for orders from Wish shoppers. This partnership should benefit the company. On the other hand, GOOGL introduced the Secure AI Framework (SAIF), a conceptual framework for secure AI systems. This framework is designed to mitigate risks specific to AI systems and should enhance GOOGL’s growth and profitability.
- Recent Financial Results: In the first quarter that ended on March 31, 2023, WISH’s revenue decreased by 49.2% year-over-year, while GOOGL’s consolidated revenues for the same period increased by 3% year-over-year. Additionally, GOOGL’s operating income and net income grew at a higher rate compared to WISH’s.
- Past And Expected Financial Performance: WISH’s revenue has been declining at a compound annual growth rate of 33% over the past three years. Analysts expect WISH’s revenue for the fiscal year ending in December 2023 to decrease by 27.3% year-over-year. On the other hand, GOOGL’s revenue has grown at a compound annual growth rate of 19.5% over the past three years. Analysts expect GOOGL’s revenue for the fiscal year ending in December 2023 to increase by 5.9% year-over-year.
- Profitability: GOOGL is more profitable than WISH, with higher gross profit margin, EBITDA margin, net income margin, and return on equity (ROE) ratios.
- Valuation: WISH is currently trading at a lower multiple compared to GOOGL, indicating that WISH is relatively undervalued.
Based on these factors, it can be concluded that GOOGL is a better investment option compared to WISH.
However, investors should always conduct thorough research and analysis before making any investment decisions.