Internet stocks including Zomato, PolicyBazaar, RateGain recover in 2023; should you buy them for long term?

Many internet stocks have recovered in 2023 after a weak investor response to their initial public offerings. This comes on the back of an improvement in their profitability, a rise in revenues and a fall in expenses in the recent quarters. Most of these stocks also hit their respective highs in the last couple of months after bottoming out post their listings. While some continue to trade below their issue prices, they have still managed to show robust performance in the recent times.

Stock price trend

Apart from FSN E-Commerce Ventures (Nykaa) and Easy Trip Planners, most stocks have given stellar returns in the last 1 year as well as in 2023 YTD.

RateGain Travel has surged the most, up 130 percent in the last 1 year and 119 percent in 2023 YTD. PB Fintech (PolicyBazaar) gained over 78 percent in the last 1 year and 56 percent in 2023 YTD.

Meanwhile, Zomato has rallied 72 percent in the last 1 year and almost 79 percent in 2023 YTD; CE Info Systems (MapMyIndia) has advanced 59 percent in the last 1 year and 103 percent in 2023 YTD; One 97 Communications (Paytm) has jumped 46 percent in the last 1 year and over 75 percent in 2023 YTD; and CarTrade Tech has risen 23 percent in the last 1 year and 46 percent in 2023 YTD.

However, Nykaa has lost around 15 percent in the last 1 year and 9 percent in 2023 YTD, and EaseMyTrip has shed 18 percent in the last 1 year and 25 percent this year so far.

The internet stocks listed this year have a long road to go. IdeaForge Technology has declined 38 percent from its listing price of ₹1,300 (listed in July 2023). The stock made a strong debut, listing at over 93 percent premium to the IPO price of ₹672.

Meanwhile, currently trading at ₹129.95, Yatra Online has been almost flat as against its listing price of ₹127.50. The stock was listed at a 10 percent discount from its IPO price of ₹142. It made its market debut last month (September).

Zaggle, however, has risen over 27 percent from its listing price of ₹164, which was the same as its IPO price. It was also listed last month.

Should you buy these stocks for the long term? Here's what experts say

Vinit Bolinjkar, Head of Research, Ventura Securities

Internet stocks have substantial growth opportunities owing to India's evolving digital economy. As the digital landscape advances, internet-based companies are poised for expansion. With increasing business growth, operating leverage is expected to come into play. In addition, post-listing, these new-age firms have become more disciplined in capital allocation and are prioritising profitable growth, said Bolinjkar, adding, “We recommend buying such stocks based on their 2-3 year forwarded valuations and competitive intensity.”

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services

Markets overreact, both on the upside and downside. The IPOs of digital stocks like Paytm and Zomato were launched during the market euphoria post Covid crash. The IPO valuations were excessive. When the market corrected after October 2021, the market went to the other extreme of very low valuations for these stocks. And with improving results, the investor optimism regarding these stocks is increasing, said Vijayakumar.

These stocks have a long runway of growth and, therefore, have the ability to deliver decent returns in the long run, he added.

Sonam Srivastava, Founder and Fund Manager at Wright Research

Currently, internet stocks are showing recovery signs, even if they haven't reached their peak values. This period may present a good opportunity for long-term accumulation, considering the rapid global digital integration. The internet sector continues to be a dominant growth area. However, investors must approach with caution due to inherent volatility. Top picks for long-term investment in the internet sector include Zomato, Angel One, Newgen Software, RateGain, CarTrade, etc.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.