Etsy and Twilio are rocketing higher, but one internet stock looks best

Facebook and Twitter may have stumbled over the last month, but shares of smaller internet companies Zillow and Twilio have surged in 2018, while Etsy shares have more than doubled.

One trader sees more gains for the web 2.0 stocks ahead.

"I kind of like them all," David Seaburg, Cowen's head of sales trading, told CNBC's "Trading Nation" on Monday. "Long term, I think the business models are pretty solid."

For Seaburg, Etsy, the e-commerce seller of handmade and vintage products, is a clear winner. The company unveiled a subscription service, Etsy Plus, in June and announced a planned 2019 roll-out of Etsy Premium, a service targeted toward larger businesses.

"Etsy showed some real confidence last quarter after they reported when they talked about a price hike from a commission perspective, or a commission hike. They also talked about a monthly subscription fee that they were going to charge. From my perspective, that's a real confident play," said Seaburg.

Gina Sanchez, CEO of Chantico Global, said she is more cautious on these internet companies as their stock prices have surged ahead of earnings growth, giving them rich valuations.

"The biggest challenge for this entire space right now is going to be their valuations," Sanchez told "Trading Nation" on Monday. She noted that Etsy is trading at a price to forward earnings multiple of 60 and Zillow at 80, while Twilio doesn't have earnings yet.

Their valuations are among the highest on Wall Street. The S&P 500 trades at 17 times forward earnings, and the comparatively frothy XLK technology ETF has a nearly 18 times forward multiple.

Those lofty valuations may pose a challenge, especially as investors are steering away from fast-growth companies back to value stocks, she said.

"While I agree that each of these individual companies has interesting names and in the long term I think they'll be very, very interesting businesses, the short term right now I think is fairly bearish for them because they really have valuation working against them," said Sanchez.

Etsy, Zillow and Twilio reported earnings after the bell Monday. In extended trading, Etsy and Twilio both surged, while Zillow slumped by more than 15 percent.

As of Monday's close, Etsy was up 107 percent so far this year, Zillow was up 42 percent and Twilio had rallied 166 percent.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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