Chicago, IL – April 9, 2025 – Today, Zacks Equity Research discusses GoDaddy GDDY, QuinStreet QNST and Asure Software ASUR.
Industry: Internet Delivery
Link: https://www.zacks.com/commentary/2441668/3-internet-delivery-services-stocks-in-focus-amid-industry-challenges
The Zacks Internet - Delivery Services industry is navigating choppy waters, with macroeconomic uncertainty, stubborn inflation and persistently high interest rates clouding the near-term outlook. Escalating tariff tensions add fuel to the fire, threatening to further squeeze both consumers and businesses. With fears of a global economic slowdown rising, discretionary and enterprise spending could take a backseat — leaving companies in this space to brace for softer demand in the quarters ahead.
Moreover, aggressive hiring and heavy investments in sales and marketing — necessary to stay competitive — are driving up costs at a time when many firms can least afford it. Expanding into new markets may offer long-term rewards, but the near-term impact on margins from high upfront costs is hard to ignore.
Despite these challenges, industry participants like GoDaddy, QuinStreet and Asure Software are strategically positioned for growth due to their sustained efforts toward adopting changing consumer preferences. A greater Internet presence in emerging markets, a burgeoning affluent middle class and the accelerated uptake of smartphones are set to aid Internet – Delivery Services industry participants. Online delivery is yet to expand beyond major metros, underlining lower penetration and significant room for growth.
The Zacks Internet - Delivery Services industry primarily comprises companies that offer services via Internet-based platforms. These include food delivery, online travel booking, direct marketing and media services and web hosting, among others. Some companies in this space offer Internet domain registration and web hosting registration and sell e-business-related software and services.
A few industry participants provide air and train ticket bookings, customized holiday packages, hotel bookings, bus tickets and car hire services. Some players offer online direct marketing and media services, including online messaging, email broadcasting, search engine marketing and brand management facilities. Growth-stage companies in the industry are spending more on R&D and sales & marketing, making it difficult for them to generate profits in the near term.
Smartphones and Internet Penetration are Fueling Growth: The relentless rise in smartphone usage and better Internet access are reshaping the delivery services landscape. Whether it's ordering dinner, booking a trip, or managing HR software from a mobile app, the digital shift is unlocking massive opportunities. Companies in the Zacks Internet – Delivery Services industry are riding this wave, with 4G adoption already widespread and 5G now emerging as a game-changer, bringing faster connections and more seamless user experiences. The broader and deeper this connectivity runs, the more scalable and efficient these businesses can become.
Shifting Consumer Preferences: The shift in consumer preferences, driven by convenience and easy accessibility, is anticipated to aid the industry. The accelerated transition from offline to online food ordering, as well as the rising penetration of online travel booking, augurs well for industry players. However, as the higher consumer spending appetite is the main driver of the overall industry’s health, any sluggishness in the global economy will pose a risk.
Tech Innovations are Giving the Industry an Edge: Advances in technology, including smart routing algorithms, real-time GPS tracking, and predictive delivery models, are making the customer experience faster, more reliable and more transparent. These advances are driving down delivery times, reducing inefficiencies and giving early adopters a real edge in a highly competitive market.
Tariff War Risks: Although these companies don’t directly import goods, the fallout from a tariff war can still hit them hard. When tariffs drive up prices, small businesses pull back, new startups pause their launches, and enterprise clients grow cautious. That ripple effect shows up in weaker advertising spending, fewer domain registrations or slower demand for digital tools. So, while the pain may be indirect, it’s real, and it could weigh on revenue growth and margins if trade tensions keep escalating.
Higher Upfront Costs to Hurt Profitability: Online delivery is yet to expand beyond major metros, underlining lower penetration and significant room for growth. However, higher upfront costs related to expansion strategies might erode profitability. Intensifying competition from big tech giants is another challenge for industry participants.
Amazon continues to build out its delivery muscle, and Alphabet is expanding into food delivery with projects like Wing and its suite of apps. These tech giants bring deep pockets, vast infrastructure and enormous user bases — raising the bar for everyone else in the industry. For smaller players, the pressure to scale quickly while defending their turf is becoming a high-stakes balancing act.
The Internet - Delivery Services industry is housed within the broader Computer and Technology sector. It carries a Zacks Industry Rank #209, which places it among the bottom 15% of nearly 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative aggregate earnings outlook for the constituent companies. The industry’s earnings estimate for 2025 has moved down 6.5% over the past 12 months.
Let’s look at the industry’s performance and current valuation.
The Zacks Internet - Delivery industry has outperformed the S&P 500 composite and the broader Zacks Computer and Technology sector over the past year.
The industry has risen 17.7% during this period, while the S&P 500 and the broader sector have declined 2.2% and 7.6%, respectively.
On the basis of forward 12-month price-to-sales (P/S), a commonly used multiple for valuing Internet-Delivery stocks, the industry is currently trading at 1.63X compared with the S&P 500’s 4.37X and the sector’s 4.92X.
Over the past five years, the industry has traded as high as 2.03X and as low as 0.66X and recorded a median of 1.10X.
GoDaddy: It is an Internet domain registrar and web hosting company that also sells e-business-related software and services. The company is engaged in designing and developing cloud-based technology products for small businesses, web design professionals and individuals. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GoDaddy is benefiting from strong momentum across the Applications & Commerce business and expanding its global footprint. Growth in bookings, primarily driven by strong customer additions and price increases in various domains, has been a key catalyst. GDDY’s focus on pricing, bundling and cost optimization, along with innovation in commerce and seamless user experiences, ensures continued momentum. It is also expanding its commerce offerings, seeing significant growth in gross payment volume. Airo, its AI-driven platform, has become a key growth driver, with increasing customer engagement and the successful launch of Airo Plus.
The Zacks Consensus Estimate for 2025 earnings has been revised downward by 6 cents to $6.63 per share over the past 60 days.
QuinStreet: It is a provider of online direct marketing and media services. QuinStreet offers online messaging, e-mail broadcasting, search engine marketing and brand management services.
QuinStreet is benefiting from the accelerated shift from an offline to an online business model across industries. Ad spending is likely to continue increasing, driven by an improving macroeconomic environment and business activities. The company is well-positioned to bank on this opportunity and acquire new customers and high-value deals.
QuinStreet carries a Zacks Rank #3 at present. The Zacks Consensus Estimate for fiscal 2025 earnings has remained unchanged at 88 cents per share in the past 60 days.
Asure Software: This is a cloud computing firm that offers business clients the chance to modernize their human capital management (HCM), time and attendance solutions, and payroll and taxes. Asure Software’s strategic initiative to become a pure software-as-a-service HCM company is aiding its top-line growth. This Zacks Rank #3 company’s focus on driving innovation for its HCM solutions is helping it expand its footprint in the HCM market.
New client additions and a continued focus on cross-selling to existing clients are driving Asure Software’s revenues. The company’s differentiated employee strategy, measurement capabilities and comprehensive product offerings are helping it win new customers.
The Zacks Consensus Estimate for Asure Software’s 2025 earnings has been revised downward by 2 cents to 89 cents per share in the past seven days.
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