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The Internet Sent These 2 Stocks Skyward on Thursday

By Dan Caplinger – Aug 5, 2021 at 11:39AM

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From e-commerce to building an online presence, high demand is lifting the prospects of many providers of goods and services.

Stocks moved higher on Thursday morning, buoyed by enthusiasm over some key earnings reports that signaled a strengthening economy in key areas like manufacturing. As of 10:15 a.m. EDT, the Dow Jones Industrial Average (^DJI 0.10%) was up 158 points to 34,950. The S&P 500 (^GSPC -0.12%) picked up 15 points to 4,418, and the Nasdaq Composite (^IXIC -0.18%) got a 56-point lift to 14,836.

The internet has transformed the world, and it's more important than ever for businesses to take full advantage of the opportunities it offers. Two companies doing a great job of that are Wayfair (W 1.13%) and HubSpot (HUBS -0.64%), and after they released their latest financial results on Thursday morning, both of their stocks took nice jumps. Here's what Wayfair and HubSpot are doing right and why investors are so happy about the prospects for these internet stocks.

Wayfair holds up well even in the reopening

Shares of Wayfair were by up more than 10% Thursday morning. Some investors were concerned that a revenue pullback for the online furniture retailer was inevitable due to the huge bump it got a year ago during pandemic-related lockdowns, but the company managed the economic reopening quite well.

Two people carrying furniture up a staircase.

Image source: Getty Images.

Wayfair did see some pressure from changing macro conditions. Revenue was down 10% from year-ago levels, with an even larger 15% drop in its U.S. business. A 16% rise in international sales helped to offset some of that decline, but net income dropped by more than half year over year, producing adjusted earnings of $1.89 per share.

However, many of Wayfair's business metrics remained encouraging. Active customer counts jumped by more than 5 million to 31.1 million, and both average order values and revenue per active customer climbed substantially over the past year. Nearly 60% of all Wayfair orders are placed via mobile device, showing the company's commitment to using technology to go wherever consumers want to shop.

Wayfair is getting a lot of repeat business from customers, and that's encouraging for its long-term prospects. Many once thought furniture could never become a successful e-commerce niche, but Wayfair has defied the naysayers and generated strong performance for shareholders.

HubSpot moves on up

HubSpot stock climbed by more than 9% in morning trading Thursday. The provider of online inbound marketing and other customer  relationship management services reported solid gains for its business.

HubSpot's second-quarter numbers looked good. Revenue jumped 53% year over year to $311 million. Adjusted net income rose almost 30% to $21.6 million, producing adjusted earnings of $0.43 per share. The company reported a 40% jump in paying customers to more than 121,000 compared to 12 months ago, and total average subscription revenue per customer climbed by 8% to more than $10,000.

The company has done a good job of widening its business scope, going beyond its initial marketing focus to include sales, service, and other cloud-based tools. It expects to keep reaping the fruits of that labor, with third-quarter guidance for sales of $325 million to $327 million and adjusted earnings per share of $0.42 to $0.44.

The morning's gains took the stock to a new all-time high, with share prices having quintupled since March 2020. Investors see a lot of potential for HubSpot, and its sustained growth is keeping shareholders happy.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends HubSpot. The Motley Fool recommends Wayfair. The Motley Fool has a disclosure policy.

Stocks Mentioned

Wayfair Stock Quote
Wayfair
W
$42.10 (1.13%) $0.47
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,429.88 (0.10%) $34.87
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,071.70 (-0.12%) $-4.87
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$11,461.50 (-0.18%) $-20.95
HubSpot Stock Quote
HubSpot
HUBS
$303.96 (-0.64%) $-1.96

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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