11 Best Internet Content Stocks to Buy

Published on May 17, 2023 at 10:09 am by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the 11 best internet content stocks to buy. To see more such companies, go directly to 5 Best Internet Content Stocks to Buy.

The internet content industry remains one of the biggest, fastest-growing domains that have ever-increasing growth prospects due to the sheer number of users in its addressable market. As of today the internet penetration stands at about 59%, which means there are still billions of people in the world who are yet to gain access to the internet. Internet content consumption keeps growing as more and more people buy smartphones and spend time online. On average an internet user spends 6.5 hours on the internet per day. Where users spend most of their time is where the money is. That’s why the race for advertising dollars keeps raging in the internet content industry as companies find new and innovative ways to grab their audience’s attention.

Audio

One of the hottest trends in the internet content industry is audio. According to data from market research firm GWI, a typical internet user spends about 1 hour and 38 minutes per day listening to music streaming services like Spotify.

That’s why companies have started to spend a fortune on improving their audio content and audio delivery channels. YouTube, which is the world’s biggest video platform, is also joining the audio race. YouTube Music and Premium service has already surpassed 80 million paid subscribers. Earlier this year, the company confirmed to Tech Crunch that it will bring audio and video-first podcasts to YouTube Music for users in the U.S. The company was reportedly working on features that will allow users to switch to audio mode while watching video podcasts.

AI in the Internet Content Industry

The internet content industry is also embracing AI and is already seeing its benefits.

During its Q4 earnings call, Meta Platforms, Inc. (NASDAQ:META)’s management talked about its AI-related features to reignite ads growth and other initiatives to make the platform more lucrative for advertisers. Here’s what the company said at the time:

“We see opportunities for continued gains in the near and medium-term, with our AI investments powering a lot of this work as we continue to improve ads ranking and enable increased automation for advertisers to make it easier for them to run campaigns and use our systems to optimize their performance. Another opportunity we have is to further scale onsite conversions through products like click-to-message, lead ads and shop ads.

Click-to-message ads continue to grow quickly and we believe they are bringing incremental demand onto our platform, with over half of click-to-message advertisers exclusively using click-to-messaging ads on our platform. We see further opportunity as we continue to scale click-to-WhatsApp ads and are investing in growing newer formats like shop ads. Over the long-term, we are investing heavily in AI to develop and deploy privacy-enhancing technologies and continue building new tools that will make it easier for advertisers to create and deliver more relevant and engaging ads. Moving now to our efficiency work, we took significant actions in 2022 to operate more efficiently. In Q4, we made the difficult decision to layoff employees while deprioritizing certain projects and curtailing non-headcount-related expenses.”

Apparently Meta Platforms, Inc. (NASDAQ:META)’s strategy and new product initiatives worked as the company reported upbeat revenue for the first quarter of 2023. The company’s short-form video content feature “Reels” was one of the factors that contributed to the growth. Mark Zuckerberg said in the company’s latest earnings call:

“When we started this work last year, our business wasn’t performing as well as I wanted. But now we’re increasingly doing this work from a position of strength.”

The Rise of Short-Form Video Content

The success of Reels wasn’t surprising though. In a bid to compete with TikTok, which has posted record levels of growth in North America and Asia, companies like Meta Platforms, Inc. (NASDAQ:META) and Alphabet Inc. (NASDAQ:GOOG) poured their resources to roll out short-form video features. And those efforts are paying off. During the first quarter of 2023, YouTube Shorts received 50 billion daily views, up from 30 billion in the prior-year quarter.

TikTok has tapped into perhaps the most lucrative areas of the internet content industry – short-form video content. The app’s top-notch algorithm and suggestions have hooked billions. Several estimates show TikTok is the most addictive social media app, with an average TikTok user in the US spending a whopping 29 hours a month on the app, much more than Facebook (16 hours) and Instagram (8 hours).

Given the scale of money to be made in the short-form video content segment, advertisers are upping their bets. According to Insider Intelligence, US short-form video advertising spending is expected to jump about 10.4% in 2023.

Earlier this year, JPMorgan conducted a survey of investors which shows a positive sentiment for the sector. Despite a gloomy environment in the market and declining ad rates, investors believe the internet sector to “slightly” outperform the S&P 500 this year, according to JPMorgan analyst Doug Anmuth. 43% of the respondents in the survey said they believe market-cap weighted internet stocks will be up more than 5% this year, while 30% expect them to be flat. 30% of respondents believe the S&P 500 to be up more than 5% in 2023, while 45% expect flat returns. Meta Platforms, Inc. (NASDAQ:META) was the favorite internet stock of investors according to the survey.

Photo by Austin Distel on Unsplash

Our Methodology

For this article, we scanned Insider Monkey’s database of 943 hedge funds and picked the top 11 companies involved in internet content production and delivery. These companies either operate platforms used by people for internet content consumption or produce original content for the internet. We also included the top Cloud companies that power major websites and streaming services on the internet. Some notable names in the list include Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL).

Best Internet Content Stocks to Buy

11. Akamai Technologies, Inc. (NASDAQ:AKAM)

Number of Hedge Fund Holders: 20

Cloud, CDN and web security services company Akamai Technologies, Inc. (NASDAQ:AKAM) ranks 11th in our list of the best internet content stocks to buy now. Akamai Technologies, Inc. (NASDAQ:AKAM)’s services are used by several notable media and content companies, including The Washington Post, LiveSwitch, Seven West Media, U.S. News, The Associated Press, Telegraph Media Group and more.

10. Fastly, Inc. (NYSE:FSLY)

Number of Hedge Fund Holders: 20

Fastly, Inc. (NYSE:FSLY) powers major websites and internet services around the world with its Cloud and CDN services. Among the major companies using Fastly, Inc. (NYSE:FSLY)’s services include Taboola, Filestack, digital publishing giant Gannett, WikiHow, Wenner Media, Wired, The Guardian, Business Insider and many more.

Of the 943 hedge funds tracked by Insider Monkey as of the end of the fourth quarter of 2022, 20 hedge funds had stakes in Fastly, Inc. (NYSE:FSLY). The biggest hedge fund stakeholder of the firm was Steve Cohen’s Point72 Asset Management which owns a $43 million stake in Fastly, Inc. (NYSE:FSLY).

Morgan Stanley analyst Sanjit Singh recently raised his rating for Fastly, Inc. (NYSE:FSLY) to Equal Weight from Underweight.

9. Snap Inc. (NYSE:SNAP)

Number of Hedge Fund Holders: 38

Snap Inc. (NYSE:SNAP) ranks 9th in our list of the best internet content stocks to buy now. Snap Inc. (NYSE:SNAP) has about 750 million monthly active users. Snap Inc. (NYSE:SNAP) is under pressure amid slow ads revenue. However, Credit Suisse’s Stephen Ju recently gave an Outperform rating to Snap Inc. (NYSE:SNAP). While the analyst acknowledges the ad revenue woes, he believes Snap Inc. (NYSE:SNAP) can see positive impact of ad platform improvements. He also believes Snap Inc. (NYSE:SNAP) could benefit from new product launches and content initiatives.

Out of the 943 hedge funds tracked by Insider Monkey, 38 hedge funds were long Snap Inc. (NYSE:SNAP). The total worth of these stakes was $895 million. The most significant shareholder of Snap Inc. (NYSE:SNAP) was D E Shaw with a $218 million stake in the company. Like Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL), SNAP is one of the most popular internet content and media stocks among hedge funds.

8. Cloudflare, Inc. (NYSE:NET)

Number of Hedge Fund Holders: 40

Cloudflare, Inc. (NYSE:NET) is a content delivery network services provider and a web security services company. A lot of major websites use Cloudflare, Inc. (NYSE:NET) services. Cloudflare, Inc. (NYSE:NET) CDN and proxy web services allow internet content to reach billions of people. Recently, Cloudflare, Inc. (NYSE:NET) posted its first quarter of 2023 results. Adjusted EPS in the quarter came in at $0.08, beating estimates by $0.05. Revenue in the quarter increased by about 36.8% year over year to total $290 million, missing estimates by $0.6 million.

Insider Monkey’s database of 943 hedge funds shows that 40 hedge funds were long Cloudflare, Inc. (NYSE:NET) as of the end of the fourth quarter of 2022.

7. Spotify Technology S.A. (NYSE:SPOT)

Number of Hedge Fund Holders: 46

Spotify Technology S.A. (NYSE:SPOT) is the first music streaming company to have crossed 200 million paid subscribers. Spotify Technology S.A. (NYSE:SPOT) also has a whopping 489 million monthly active users. Spotify Technology S.A. (NYSE:SPOT)’s platform is gaining traction amid its growing popularity as a go-to platform for music and podcasts.

As of the end of the last quarter of 2022, 46 hedge funds were long Spotify Technology S.A. (NYSE:SPOT), according to Insider Monkey’s database of 943 hedge funds. The biggest hedge fund stakeholder of Spotify Technology S.A. (NYSE:SPOT) was John Overdeck and David Siegel’s Two Sigma Advisors which owns an $86 million stake in Spotify Technology S.A. (NYSE:SPOT).

6. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Holders: 99

The Walt Disney Company (NYSE:DIS) is a media and entertainment giant and plays a key role in the production and consumption of internet content on several mediums. The company’s Disney+ streaming service has over 160 million subscribers. The Walt Disney Company (NYSE:DIS) also owns Hulu, sports streaming platform ESPN+, Movies Anywhere, among other platforms.

As of the end of the last quarter of 2022, 99 hedge funds were long The Walt Disney Company (NYSE:DIS). The most notable hedge fund stakeholder of The Walt Disney Company (NYSE:DIS) was Nelson Peltz’s Trian Partners which owns a $785 million stake in the company.

In addition to Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL), DIS is one of the best internet content stocks to buy according to hedge funds.

Click to continue reading and see 5 Best Internet Content Stocks to Buy.