These 3 Stocks Should Soar in the Next Bull Market
A bull market is coming.
While no one knows when or how much the stock market will fall by then, the start of another sustained cycle of market growth is all but guaranteed.
This is because every bear market in the United States has been followed by a bull market, and that includes everything from the Great Depression and the 2008-2009 financial crisis to the pandemic and the tech bubble. There’s nothing so unique about the current bear market to make investors think otherwise, and stocks should eventually rally as interest rates stabilize and inflation cools.
When that happens and the stock market starts to rally again, you’ll want to own these three stocks.
The #1 Bullish Stock to Own: Airbnb
I can think of no stock that is more unfairly punished by recession fears than Airbnb (ABNB 1.91%). The company has grown by leaps and bounds over the past year as it benefited from the travel recovery and continues to gain market share, but the stock is down 44%.
Unlike its tech peers, Airbnb has experienced virtually none of the macro headwinds that affect tech stocks in areas such as software and e-commerce. Revenue rose 29% in the third quarter and the company reported revenue growth of 17% to 23% in the fourth quarter as margins were expected to increase.
Airbnb’s growth may continue to moderate in 2023 as the rest of the travel industry is also expected to normalize, but those headwinds are already priced into the stock. It trades at a price-earnings ratio of just 40, roughly double the valuation of the S&P500.
Regardless of what happens in the economy, Airbnb still has a wide open growth opportunity ahead of it. It targets an addressable market worth over $1 trillion, and the company is uniquely positioned to capitalize on it as it dominates the home-sharing market. Its margins should also continue to improve thanks to its very scalable offer business model.
When the stock market begins to recover, Airbnb could soar into the next bull market.
Bullish action #2 to own: Shopify
Shopify (STORE 5.79%) went from market darling to market failure in just a few months, it seems. The e-commerce software stock has surged since its 2015 IPO during the pandemic, but the stock has crashed in the past year. It’s down 72% year-to-date as growth slows in the e-commerce sector, and last year’s profit is back to a loss.
However, most signs point to Shopify facing normal cyclical headwinds that will eventually subside, rather than more structural issues that are permanently hurting the business.
For example, Black Friday/Cyber Monday sales on the platform jumped 21% from a year ago to $7.5 billion. This growth comes even as dozens of major retailers, including Amazonwarned of a dismal holiday season and guided to significantly weaker than normal growth.
The Black Friday weekend results also show that Shopify remains an attractive option for shoppers and merchants looking to sell online, whether small businesses or Fortune 500 companies.
Shopify still dominates e-commerce software, and Amazon’s attempt to disrupt it with its Buy with Prime program also seems to have fell flat.
E-commerce has not finished developing, even if difficult comparisons could persist for a few quarters. Once the economy starts to recover, Shopify’s growth also looks set to accelerate, which could give the stock some serious spark.
Bull Market Stock #3 to Own: Roku
Like the other two actions in this list, Roku (ROKU 3.40%) is also the market leader in its own technology niche as the largest streaming platform in the United States
Roku’s stock has fallen even more this year than Airbnb or Shopify. The company invested heavily during pandemic boom times only to see advertising growth quickly evaporate this year, leading to steep losses and near zero growth. As a result, Roku stock is down 77% year-to-date.
However, Roku is far from the only digital advertising platform to experience these kinds of headwinds. Both Alphabet and Metaplatformsthe two largest digital advertising companies in the United States also experienced a sharp deceleration in growth, which is understandable in a declining economic environment.
Advertising is cyclical. It’s one of the first expenses companies cut when they’re scared of a recession, because it’s easy to get ad spend up and down, and it’s a much easier way to cut costs than , for example, layoffs, or the closing or sale of physical real estate. domain.
For the fourth quarter, the company actually expects revenue to decline, but Roku’s ad business should pick up as the economy recovers and the ad market follows suit. The good news is that the connected TV market is booming, with both disney and netflix launch ad-based levels this quarter. This should expand Roku’s monetizable ad base, as it typically takes 30% of ad inventory from its streaming partners.
While the fourth quarter numbers might be ugly, streaming continues to grow and the streaming advertising market, based on Recent Comments Netflix co-CEO Reed Hastings looks set to explode.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Jeremy Bowman holds positions at Airbnb, Amazon.com, Meta Platforms, Netflix, Roku, Shopify and Walt Disney. The Motley Fool occupies and recommends Airbnb, Alphabet, Amazon.com, Meta Platforms, Netflix, Roku, Shopify and Walt Disney. The Motley Fool recommends the following options: January 2023 Long Calls at $1,140 on Shopify, January 2024 Long Calls at $145 on Walt Disney, January 2023 Short Calls at $1,160 on Shopify, and January Short Calls 2024 at $155 on Walt Disney. The Motley Fool has a disclosure policy.