The markets have been volatile these past few months. There have been positive and negative reversals of fortunes for Internet companies, and so it's always good to benchmark what's going on. I did a similar analysis in January 2016, and so this post should serve as a mid-year progress report for the state of Internet stocks. Using my own index of Internet stocks, let's first look at price performance (data as of 6/20).
In social, Facebook has continued to execute and impress Wall Street, while Twitter has done the opposite. LinkedIn fell off a cliff in February but then Microsoft decided to acquire them right around where their stock was before the drop. In marketplace-land, healthy two-sided marketplaces such as Zillow, GrubHub and Shutterstock have rebounded significantly with 50-60% increases over the past 6 months. Note that these marketplaces were some of the hardest hit back in January when the market tanked. Others such as Etsy, Yelp, TrueCar and Just-Eat are also up. The only laggards are Angie's List, TripAdvisor, eBay, and most notably LendingClub which has been outright eviscerated by the public market (a topic I will leave for another post). In terms of ecommerce, unlike the rebound we've seen with marketplaces, most ecommerce companies have continued to underperform. Coupons is up 132% but should be ignored since it's coming off of an artificially low base (the company basically collapsed in 2015). Groupon, Amazon, ASOS and Shutterfly are up modestly, but the rest of the category is down significantly. Digital media continues to have solid performance with Yahoo, Pandora, WebMD and the gaming publishers all trading up. Lastly, for the travel category, not much has happened aside from the continued out-performance of travel leader Priceline.
The next chart looks at NTM revenue multiples. The companies are organized based on highest to lowest revenue multiples from January. The dark bar is from January, and the lighter bar is the current NTM revenue multiple.
There isn't much to comment on in social. Facebook and Twitter haven't changed much, and neither has LinkedIn after you take into account the M&A spike. Facebook continues to be the Internet company with the highest relative valuation, and the only company to exceed 10x NTM revenue. The healthier marketplaces trade higher than they did in January, so more like 4.0-6.0x revenue instead of 3.0-5.0x revenue as they did in January. Just-Eat continues to boast the highest marketplace valuation multiple at 7.1x NTM revenue. Lower growth or struggling marketplaces are trade at a modest 1.0-2.5x revenue. Ecommerce companies tend to be valued in a narrower band, anywhere from 0.4x NTM revenue for struggling businesses to upwards of 2.0x NTM revenue for premium companies. Moving over to digital media, Yahoo has traded up to 8.7x NTM revenue on M&A considerations, premium publishers such as Netflix, Activision and EA trade at 4.0-5.0x NTM revenue, and laggards such as Zynga, Pandora and Take-Two trade in the 1.0-2.0x range. Last but not least, in the travel sector Priceline boasts a 6.1 NTM revenue multiple with TripAdvisor close behind, while Expedia trades at a more modest 1.9x.
It's important to emphasize that most companies aren't valued solely on revenue multiples. However, it is the simplest way to get an elementary sense for value. The market has been volatile lately and my guess is that these charts will again look very different by the end of 2016.