Amazon, Netflix: Top Internet Retail Stocks

BOSTON (TheStreet) -- Although a recovery is underway, consumers still favor online shopping venues. Here are the five best Internet retail stocks, according to TheStreet's quantitative model, which ranks stocks based on fundamentals and performance.

5. Shutterfly

(SFLY) - Get Report

enables users to upload, reformat and order pictures online.

Quarter

: Fourth-quarter profit increased 68% to $24 million, or 88 cents a share, as revenue grew 22% to $131 million. Shutterfly's operating margin inched up from 27% to 28%. Its balance sheet stores $181 million of cash and no debt.

Stock

: Shutterfly has soared 177% in the past year, outperforming U.S. indices. The stock trades at a price-to-projected-earnings ratio of 43, a 19% premium to its peer-group average. It's cheap based on book value and cash flow.

Consensus

: Of 11 analysts covering Shutterfly, eight recommend purchasing its shares and the remainder advise holding them.

Craig-Hallum Capital

expects the stock to climb 14% to $25. Our stock model rates Shutterfly "buy."

4. Amazon.com

(AMZN) - Get Report

is the largest Internet retailer.

Quarter

: Fourth-quarter profit surged 71% to $384 million, or 85 cents, as revenue stretched 42% to $9.5 billion. Amazon.com's operating margin ascended from 4.2% to 5.2%. Its balance sheet holds $6.4 billion of cash and $393 million of debt.

Stock

: Amazon.com has doubled during the past 12 months, beating major benchmarks. The stock sells for a price-to-projected-earnings ratio of 35, on par with competitors' shares. It's costly based on book value, sales and cash flow.

Consensus

: Of analysts covering Amazon, 24 advocate purchasing its stock, 11 say to hold and two advise selling the shares.

MKM Partners

expects Amazon to climb 54% to $200. Our model rates Amazon "buy" and projects the stock will hit $169.

3. Priceline.com

(PCLN)

is an online travel company.

Quarter

: Fourth-quarter profit more than doubled to $78 million, or $1.55, as revenue expanded 33% to $542 million. Priceline's operating margin widened from 12% to 23%. The company has $801 million of cash and $160 million of debt.

Stock

: Priceline.com has nearly tripled in the past year, trouncing U.S. indices. The stock trades at a price-to-projected-earnings ratio of 18, a 51% discount to its peer-group average. Shares are expensive based on sales and cash flow.

Consensus

: Of analysts following Priceline.com, 11 advise purchasing its shares and 11 recommend holding them.

Bank of America

(BAC) - Get Report

has a $300 price target on the stock, implying a 24% upside. Our model expects it to rise even further, to $312.

2. Netflix

(NFLX) - Get Report

rents DVDs through the mail.

Quarter

: Fourth-quarter profit rose 36% to $31 million, or 56 cents, as revenue expanded 24% to $445 million. Netflix's operating margin inched up from 10% to 11%. Its balance sheet contains $320 million of cash and $238 million of debt.

Stock

: Netflix has surged 85% during the past 12 months, beating major benchmarks. The stock sells for a price-to-projected-earnings ratio of 23, a 37% discount to the industry average. It's also cheap based on sales and cash flow.

Consensus

: Of analysts covering Netflix, 12 say to buy its shares, 16 advise holding and six recommend selling them.

Canaccord Adams

believes the stock will gain another 19% to $85. Our model projects a lofty price target of $91.80.

1. PetMed Express

(PETS) - Get Report

sells animal medications online.

Quarter

: Fiscal third-quarter profit increased 14% to $5.6 million, or 25 cents, as revenue climbed 11% to $48 million. The operating margin remained steady at 17%. PetMed holds $57 million of cash, equating to a quick ratio of 11, and no debt.

Stock

: PetMed Express has advanced 48% in the past year, lagging behind U.S. indices. The stock trades at a price-to-projected-earnings ratio of 15, a 58% discount to its peer-group average. It's also inexpensive based on book value and sales.

Consensus

: Of 11 firms covering PetMed Express, eight rate its stock "buy" and the remainder rate it "hold."

CL King & Associates

expects the stock will hit $26, leaving a 29% gain on the table. Our model expects it to touch $23.43.

-- Reported by Jake Lynch in Boston.