Consumer internet businesses are redefining how people engage with the world by giving them instant connectivity and convenience. This influence cuts both ways though because they have high exposure to the ups and downs of consumer spending, and the market seems to believe the tide is turning in the wrong direction - over the past six months, the industry has tumbled by 1.9%. This performance is a noticeable divergence from the S&P 500’s 10% return.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here is one internet stock boasting a durable advantage and two that may face trouble.
Two Consumer Internet Stocks to Sell:
Chewy (CHWY)
Market Cap: $14 billion
Founded by Ryan Cohen, who later became known for his involvement in GameStop, Chewy (NYSE: CHWY) is an online retailer specializing in pet food, supplies, and healthcare services.
Why Does CHWY Worry Us?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 8.5% over the last three years was below our standards for the consumer internet sector
- Estimated sales growth of 6.1% for the next 12 months implies demand will slow from its three-year trend
- High servicing costs result in an inferior gross margin of 29.4% that must be offset through higher volumes
At $33.74 per share, Chewy trades at 16.9x forward EV/EBITDA. To fully understand why you should be careful with CHWY, check out our full research report (it’s free).
Coursera (COUR)
Market Cap: $1.06 billion
Founded by two Stanford University computer science professors, Coursera (NYSE: COUR) is an online learning platform that offers courses, specializations, and degrees from top universities and organizations around the world.
Why Are We Cautious About COUR?
- Preference for prioritizing user growth over monetization has led to 7.3% annual drops in its average revenue per customer
- Estimated sales growth of 5.9% for the next 12 months implies demand will slow from its three-year trend
- High marketing expenses suggest it needs to spend heavily on new customer acquisition to sustain momentum
Coursera’s stock price of $6.35 implies a valuation ratio of 3.6x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than COUR.
One Consumer Internet Stock to Watch:
Lyft (LYFT)
Market Cap: $7.32 billion
Founded by Logan Green and John Zimmer as a long-distance intercity carpooling company Zimride, Lyft (NASDAQ: LYFT) operates a ridesharing network in the US and Canada.
Why Could LYFT Be a Winner?
- Active Riders have grown by 11.2% annually, allowing for more profitable cross-selling opportunities if it can build complementary products and features
- Performance over the past three years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 33.8% outpaced its revenue gains
- Free cash flow margin grew by 25 percentage points over the last few years, giving the company more chips to play with
Lyft is trading at $18.43 per share, or 10.5x forward EV/EBITDA. Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
