The demand for internet services is rising globally, with organizations focusing on digital transformation and expanding their online platforms. Thus, the stocks of internet service companies are rebounding rapidly following an extended slump earlier this year. Internet companies J2 Global (JCOM) and CarGurus (CARG) possess substantial growth potential and should deliver robust returns over the long term.

The continuation of remote working arrangements even with the easing of COVID-19 pandemic restrictions and rapid tech integration in virtually all spheres as part of a fourth industrial revolution, are driving the demand for interest services.

Most companies invested in digital assets to stay operational amid the pandemic-driven economic slowdown, and educational institutions had to depend solely on online platforms for teacher-student interaction. In fact, even the trading of cars has seen much increased transactional activity on online platforms. And OpenVault Broadband Insights (OVBI) reported an increase of 51% in broadband traffic in 2020 owing primarily to remote learning and remote work.

The demand for internet services is rising significantly with several organizations redesigning their operational structures to increase their efficiencies. Thus, we think internet stocks J2 Global, Inc. and CarGurus, Inc. are poised to gain substantially over the long run.

J2 Global, Inc.

JCOM is a leading internet information and services company. It operates through two segments: cloud services and digital media. JCOM has a record of 25 consecutive fiscal years of revenue growth. The company is based in Los Angeles.

On June 2, JCOM announced its plan to redeem its outstanding convertible senior notes due 2029 in August. This should reduce the company’s debt and interest burden significantly.

And in April, the company announced its plan to split its operations into two independent publicly traded companies—J2 Global and Consensus—by the third quarter of 2021. This will also include a spin-off of at least 80.1% of the outstanding shares of Consensus common stock to JCOM shareholders.

JCOM’s total revenues increased 19.8% year-over-year to $398.2 million in its  fiscal first quarter, ended March 31. Its operating income grew 42.1% from its  year-ago value to $78.5 million, while its non-GAAP net income improved 43.9% year-over-year to $97.2 million. The company’s non-GAAP EPS increased 55.8% year-over-year to $2.18.

Analysts expect JCOM’s revenues to increase 24.8% year-over-year to $394.56 million in the current quarter, ending June 2021. A $2.03 consensus EPS estimate for the current  quarter indicates a 18.7% rise from the same period last year.  JCOM surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of JCOM have gained 99.5% over the past year, and 42.1% year-to-date.

It is no surprise that JCOM has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock also has a B grade for Growth, Value and Quality. Among the 43 stocks in the Internet – Services industry, JCOM is ranked #1.

JCOM shares were trading at $139.13 per share on Friday afternoon, up $0.29 (+0.21%). Year-to-date, JCOM has gained 42.42%, versus a 14.74% rise in the benchmark S&P 500 index during the same period.

To see additional JCOM Ratings for Sentiment, Stability and Momentum, click here.

CarGurus, Inc.

CARG provides an online automotive marketplace connecting buyers and sellers of new and used cars internationally. The Cambridge, Mass. company helps shoppers find great deals from top-rated dealers. Currently, the company has more than 44 million global average monthly unique visitors.

On May 21, CarOffer, a wholly owned subsidiary of CARG, reported record-breaking levels of dealer enrollment on its automated instant wholesale vehicle trade platform. This demonstrates CARG’s substantial market share in the used cars sector.

CARG’s revenue increased 8.7% year-over-year to $171.4 million in its  fiscal first quarter, ended March 31. Its net income stood at $19.6 million, up 54% from the same period last year. Its income from operations grew 114.6% from the year-ago value to $25.8 million. The company’s EPS increased 72.7% year-over-year to $0.19.

A $189.73 million consensus revenue estimate for its fiscal second quarter (ending June 2021) indicates a 100.3% increase year-over-year. The Street expects the company’s EPS to rise 31.6% from the prior year quarter to $0.25 in the current quarter. CARG has an impressive earnings surprise history also;  it beat the consensus EPS estimates in three out of trailing four quarters.

CARG gained 12.4% over the past five days to close yesterday’s trading session at $27.54. The stock has gained 5.7% over the past year.

CARG has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. CARG has an A grade for Quality and a B grade for Growth and Value.  It is ranked #3 in the Internet industry.

Click here to view additional CARG Ratings for Momentum, Sentiment and Stability.