With so many excellent stocks in the market, it's challenging to pick only two. But after browsing the long list of stocks I follow, I have found two that look especially attractive right now.
Airbnb (NASDAQ:ABNB) is a travel company rebounding from the devastations caused by the pandemic. And Pinterest (NYSE:PINS) is an image-based social media business still in the early stages of its expansion. Keep reading to find out why these are my favorite two stocks at the moment.
Image source: Getty Images.
1. Airbnb
Airbnb is an exciting travel company in that it does not own or operate the physical properties on its site that people book stays in. Instead, Airbnb offers a platform that matches guests with hosts worldwide. To generate revenue, it takes a small percentage of each transaction. This asset-light business model allows it to grow without significant capital investments in physical infrastructures, that competitors like hotels or resorts need to make.
The growth potential for this operation is massive. According to Statista, the hotel and resort industry was worth $1.47 trillion annually in 2019. Of course, the pandemic crushed the travel industry over the past two years, and the market has only recovered partially, with 2021 travel industry revenue estimated at $950 billion.
But Airbnb is taking a larger share of the market. Even though the overall travel industry has not recovered fully from the pandemic, Airbnb's revenue in its most recent quarter (ended Sept. 30) was 36% higher than the same period in 2019. Further, the company reduced expenses at the pandemic onset, and now that revenue is bouncing back, net profit surged 213% compared to the same quarter in 2019.
Surprisingly, Airbnb stock is trading at cheaper valuations than ever. Airbnb is trading at a price-to-free cash flow ratio of 58.73 and a price-to-sales ratio of 18.12. According to those metrics, Airbnb stock has hardly ever been cheaper.
2. Pinterest
Like many other social media companies, Pinterest is free to join and to use. "Free" is an excellent customer value proposition so long as you can provide something worth signing up for, and judging by its 444 million monthly active users, Pinterest has something compelling. The company makes money by strategically incorporating advertisements into the media it shows to its users.
In its brief history, Pinterest has grown revenue at a rapid rate. From 2017 to 2020, Pinterest's revenue increased from $473 million to $1.7 billion. Still, Pinterest captures a small fraction of the overall ad industry sales. According to GroupM, global ad revenue reached $763 billion in 2021. That was up by 22.5% from 2020, but more interestingly for Pinterest is the trend within the trend. The digital share of ad revenue grew to 64.4% in 2021, up from 52.1% in 2019. With marketers shifting more dollars to digital channels, Pinterest stands to benefit.
Management is working on making it easier for marketers to use its platform to gain the attention of audiences worldwide. Specifically, Pinterest recently expanded efforts to build out monetization capabilities in its international segment. The segment is trailing its domestic market, and management is determined to capitalize on its opportunity.
Like Airbnb, Pinterest's stock looks like a bargain right now. It's trading at a price-to-free cash flow ratio of 32.87 and a price-to-sales ratio of 8.54, both near the lowest it has sold for. It's no surprise why it's one of my favorite stocks to buy right now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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January 21, 2022 at 07:40PM
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