Bear markets can be brutal on our emotions. But they can also create tremendous profit opportunities for investors. Even the best companies can see their stock prices decline during economic downturns. But they are often among the first to rebound when the stock market eventually recovers.
If you’re looking for great deals to buy today, consider these two premium products. growth stocks. Powerful catalysts could lead to strong rebounds in their stock prices in the years to come.
waltz disney
Bob Iger is back. The executive who helped build waltz disney (SAY -0.71%) in the entertainment titan, he recently returned to his role as CEO today. Iger oversaw Disney’s acquisitions of Pixar, Marvel and Lucasfilm – all of which became profit engines for the company. Now, Iger aims to make Disney+ another powerful profit engine in the years to come.
With over 164 million subscribers as of October 1, Disney+ is already a formidable force in streaming. Combined with more than 24 million customers for ESPN+ and 47 million for Hulu, Disney’s total streaming subscriber count exceeds 235 million. In comparison, netflix ended the third quarter with just over 223 million subscribers.
However, Disney’s streaming business is not yet profitable. The company’s direct-to-consumer segment generated an operating loss of nearly $1.5 billion in its most recent quarter as Disney spent heavily to bolster its already impressive content library. But management expects Disney+ to become profitable in 2024. price increases and a new ad-supported plan should help it do just that.
Once its streaming operations start contributing to its earnings output, investors should have a better idea of Disney’s true earnings potential, which has been suppressed by its growth investments. This should result in a significantly higher share price. You can buy ahead of those likely gains, as Disney shares are currently still down 40% over the past year.
Airbnb
After giving up on travel during the early stages of the pandemic, many people are looking forward to taking a vacation in 2023. And they are increasingly turning to Airbnb (ABNB 0.08%) to find their dream destinations.
The short-term rental ad platform is also benefiting from the work-from-home trend. So-called digital nomads use Airbnb to find and book accommodation in places around the world, allowing them to travel while working remotely.
These trends are helping to fuel Airbnb’s growth. Nights and experiences booked on its platform jumped 25% year-over-year to 99.7 million in the third quarter. This resulted in a 29% increase in revenue to $2.9 billion and a 46% increase in net income to $1.2 billion.
This impressive performance highlights the scalability of Airbnb’s business model. The company’s profits tend to grow even faster than its revenue, due to the relatively low expenses it incurs serving as an online marketplace. More than 4 million hosts bear the responsibility and costs of obtaining and preparing their properties for renters. Airbnb then takes a percentage of these rental transactions as fees.
With little capital expenditure, Airbnb is a cash-generating machine. It generated $960 million in free cash flow in the third quarter alone – and a whopping $3.3 billion in the past 12 months.
And yet, Airbnb shares have fallen 47% over the past year. Like many growth stocks, Airbnb has seen its price/earnings multiple compress as investors have become more cautious during the current bear market. Its stock now trades at less than 33 times its projected earnings per share in 2023. That’s an attractive price for a high-quality company that is expected to grow earnings by more than 20% annually over the next half-decade. .
Joe Tenebruso has positions at Walt Disney. The Motley Fool holds positions and recommends Airbnb, Netflix and Walt Disney. The Motley Fool recommends the following options: January 2024 long calls at $145 on Walt Disney and January 2024 short calls at $155 on Walt Disney. The Motley Fool has a disclosure policy.
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