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6 Internet Stocks Set to Beat Estimates in Q3 Earnings Season

Shilpa Mete
·5-min read

Internet stocks’ third-quarter 2020 performance is expected to have significantly benefited from an uptick in the demand for Internet-based services and products as a result of the coronavirus-led growing work-from-home and learn-from-home trends.

Moreover, the practice of social distancing in a bid to contain the virus outbreak has bolstered growth of online shopping services globally, which, in turn, is expected to have remained a major tailwind.

Further, the growing proliferation of video conferencing tools, thanks to the increasing remote working trend, is anticipated to have remained a positive in the quarter under review.

Additionally, increased user engagement on social media platforms, owing to the coronavirus outbreak-led lockdowns and shelter-at-place guidelines, is likely to have aided growth of the Internet companies that offer such platforms.

This is evident from the better-than-expected performance delivered recently by Snap SNAP. The company’s third-quarter 2020 results were primarily driven by an improved user engagement, which aided growth in its daily active users (DAU) base.

Prospects for Internet Stocks

In the coronavirus-hit world, Internet stocks have beengaining from the rapid adoption of cloud computing services, which are helping organizations to remotely process a lot of information, build and run crucial applications and services, and enable employees to work from anywhere across the globe.

Additionally, the emergence of remote health diagnostic and telehealth, which is spurring the Internet usage penetration, is likely to have been beneficial for Internet stocks in the third quarter.

Further, the increasing adoption of high-speed Internet services and the strengthening deployment of 5G technology have been tailwinds.

Also, the rising adoption of Internet-of-Things (IoT), and increasing proliferation of streaming services, online delivery services, online gaming and online payment services are expected to have aided the performance of the companies in the industry further.

Furthermore, the strengthening demand for SaaS-based (or Software as a Service) applications is expected to have remained another growth-driving factor for Internet stocks in the quarter under review.

How to Make the Right Pick?

With the presence of several industry participants, finding the right Internet stocks with the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes this task fairly simple.

You could narrow down your choices by looking at the stocks that have the perfect combination of the two key elements: 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 the stocks that have the maximum chances of beating estimates at 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 mix of ingredients, the odds of an earnings beat are as high as 70%.

Best Bets

Buenos Aires, Argentina-based MercadoLibre MELI is slated to report third-quarter 2020 results on Nov 4. The company has an Earnings ESP of +258.97% and it sports a Zacks Rank #1 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for the bottom line has moved upward from a loss of 5 cents to a gain of 8 cents over the past 30 days.

MercadoLibre, Inc. Price and EPS Surprise
MercadoLibre, Inc. Price and EPS Surprise

Mountain View, CA-based Alphabet GOOGL is scheduled to report third-quarter 2020 numbers on Oct 29. The company has an Earnings ESP of +7.40% and a Zacks Rank #2 currently. The Zacks Consensus Estimate for earnings has been revised upward by 1.2% to $11.34 per share in the past 30 days.

Alphabet Inc. Price and EPS Surprise
Alphabet Inc. Price and EPS Surprise

Oklahoma City, OK-headquartered Paycom Software PAYC is slated to report third-quarter 2020 results on Nov 4. The company has an Earnings ESP of +7.97% and a Zacks Rank #2 currently. The Zacks Consensus Estimate for earnings has been revised upward by 1.8% to 57 cents per share in the past 30 days.

Paycom Software, Inc. Price and EPS Surprise
Paycom Software, Inc. Price and EPS Surprise

Brooklyn, NY-headquartered Etsy ETSY is scheduled to report third-quarter 2020 results on Oct 28. The company has an Earnings ESP of +4.68% and a Zacks Rank #3 currently. The Zacks Consensus Estimate for earnings has been revised upward by 1.7% to 59 cents per share in the past 30 days.

Etsy, Inc. Price and EPS Surprise
Etsy, Inc. Price and EPS Surprise

Menlo Park, CA-headquartered Facebook FB is scheduled to report third-quarter 2020 numbers on Oct 29. The company has an Earnings ESP of +2.34% and a Zacks Rank #3 currently. The Zacks Consensus Estimate for earnings has been revised upward by 1.04% to $1.93 per share in the past 30 days.

Facebook, Inc. Price and EPS Surprise
Facebook, Inc. Price and EPS Surprise

San Francisco, CA-based Twitter TWTR is slated to report third-quarter 2020 results on Oct 29. The company has an Earnings ESP of +26.23% and a Zacks Rank #3 currently. The Zacks Consensus Estimate for earnings has been revised upward by 20% to 6 cents per share in the past 30 days.

Twitter, Inc. Price and EPS Surprise
Twitter, Inc. Price and EPS Surprise

Breakout Biotech Stocks with Triple-Digit Profit Potential

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Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>

Click to get this free report Facebook, Inc. (FB) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Etsy, Inc. (ETSY) : Free Stock Analysis Report Paycom Software, Inc. (PAYC) : Free Stock Analysis Report MercadoLibre, Inc. (MELI) : Free Stock Analysis Report Twitter, Inc. (TWTR) : Free Stock Analysis Report Snap Inc. (SNAP) : Free Stock Analysis Report To read this article on Zacks.com click here.