Returns as of 03/06/2022
Returns as of 03/06/2022
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If you’ve got an extra $10,000 not needed for necessities for at least the next few years, investing it in the stock market can be an excellent place to put your funds to work.
In particular, two stocks you can consider buying are Airbnb (NASDAQ:ABNB) and Amazon (NASDAQ:AMZN). The travel facilitator will benefit from increased mobility as the pandemic wanes. And Amazon is growing the more profitable business segments even as its e-commerce sales slow down.
Image source: Getty Images.
Unsurprisingly, global hotel and resort industry spending cratered at the pandemic onset in 2020. Indeed, the market size dropped to $610 billion in 2020, down from $1.47 trillion in 2019. As economies reopened, the industry recovered in 2021 to $950 billion, but it was still far below 2019.
Interestingly, Airbnb’s revenue in 2021 at $6 billion was 25% higher than in 2019. So while the overall industry was down nearly 33% from its 2019 level, Airbnb was 25% higher. That means Airbnb is gaining market share. More folks are choosing Airbnb over traditional hotels and resorts, which makes sense. The broad selection of accommodations increases the chance that travelers find what they are looking for.
No one likes to pay for more than they need or book a smaller place to stay than what they want. Airbnb is an excellent alternative to the primarily one-size-fits-all offerings at traditional hotels.
Perhaps equally as important is that Airbnb did not sit idle at the pandemic onset. Management moved quickly to reduce costs, and the moves are paying off. The company has delivered a positive net income in two consecutive quarters for the first time.
To make Airbnb even more attractive, it sells at a price-to-free cash flow of 44.1, the lowest in its young history as a public company.
Unlike Airbnb, Amazon thrived at the pandemic onset. Remarkably, sales increased by $106 billion from 2019 to 2020. Most businesses go through their life cycle never achieving $100 billion in sales. Amazon grew sales by over $100 billion in one year.
Admittedly, the market environment was highly favorable, with hundreds of millions of people looking to avoid shopping in person. That said, it took brilliant business management and execution to capitalize on that customer demand. (Not all managements are as capable — just look at what happened at Peloton.) As a result, Amazon gained millions of new customers and recently felt confident enough in its value proposition to raise the fees for Amazon Prime.
Subscription services brought in $8.1 billion in revenue for Amazon in its fourth quarter ended Dec. 31, up 16% from the previous year; with fees going up, that figure is likely to go higher.
What’s more, Amazon has rapidly grown its advertising business. In Q3 2020, the segment generated $4.9 billion in sales; in Q4 2021, that number was $9.7 billion. Finally, its web services segment, with an operating profit margin near 30%, has grown from $11.6 billion to $17.8 billion in that same time frame.
Those rapidly growing, profitable segments more than offset the impacts of slower sales growth in online sales, which was just 1% in its most recent quarter.
Like Airbnb, you can scoop up shares of Amazon at an inexpensive valuation. Amazon is selling at a price-to-earnings of 45.4, the lowest it’s been in the last five years.
So if you’ve got a few thousand bucks you want to invest over the next several years, Amazon and Airbnb are excellent stocks to buy and hold.
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Stock Advisor launched in February of 2002. Returns as of 03/06/2022.
Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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