The inevitable ups and downs of the stock market sometimes create opportunities to buy great stocks at sale prices. There is usually a reason (maybe even several reasons) associated with the price being discounted or lower than it used to be. It is then up to the investor to decide if the price has fallen too far and is now a bargain for what might otherwise be considered a good stock to own.
Two examples of stocks currently on sale that could be an opportunity buy for long-term investors are Peloton (PTON 8.48%) and Pinterest (PINS 5.92%). Both stocks have gotten hammered over fears that reopening economies will be harmful to the companies' businesses. While the fears sparking the sell-off may be true to some extent, there are other compelling reasons to think these are two great companies to own stock in for the long run.
Exercise equipment maker Peloton certainly benefited since the onset of the pandemic when gyms had to close and people looked for in-home exercise options. But investors should note that the company was growing sales by at least 100% each year for six years in a row. The pandemic wasn't the only reason its products were on fire with consumers. Its interactive exercise equipment keeps users engaged and provides a sense of community among those who own a Peloton machine.
Just as shopping online is more convenient than shopping at brick-and-mortar stores, working out at home is more convenient than at a gym. In the time it takes some people to drive to their local gym, find parking, and walk to the workout area, they could have completed a 20- to 30-minute routine on a home-based Peloton.
It's trends like this that fuel Peloton's growth. And this trend is not only present in its current markets, but in most countries as well. The company is planning to expand to a couple of new markets each year. Since its products are loved in current markets, it will probably receive a warm welcome as it expands.
The stock is down 33.8% from its 52-week high set in January, mostly because investors fear sales will decline as the economy reopens. Even if its growth rate decelerates in the near term, it will not change the company's excellent long-term prospects.
Pinterest experienced a surge of new users and increasing engagement during the most acute phases of the pandemic. Folks were looking for entertainment options that can be consumed in the safety of their homes, and Pinterest was one that fit the bill. The image-based social media site helped people get insights into things that can be done around the house, like new meal recipes and home decor ideas.
The company added 62 million monthly active users (MAU) between Q2 of 2020 and Q1 of 2021. Advertisers followed and started increasing the money they spent on Pinterest's platform. In that same period, the average revenue per user (ARPU) increased from $0.70 to $1.04.
In its most recent quarter, however, as economies reopened, Pinterest shed 24 million MAU. One bright spot during the otherwise disappointing quarter was that advertisers ramped up spending, and ARPU increased to $1.32, which was 89% higher than the same quarter last year and 27% higher than the previous quarter.
The increase in ARPU was driven by two factors: First, Pinterest increased the number of advertisements shown to users, perhaps as a result of increasing demand from marketers. Secondly, Pinterest raised the prices it was charging per advertisement.
Still, the drop in MAU took center stage, and investors sent its stock lower after the announcement. The stock is down 25.7% since the earnings report release over concerns about the drop in MAU and the risk that the decline will be a continuing trend. Investors willing to accept the higher risk can get a great company on sale.
Overall, Peloton and Pinterest are great companies offered at sale prices. Investors willing to overlook the blemishes causing price declines are getting two great companies with the potential to deliver great returns in the long run.