Labor shortages are spreading across the economy. Mostly, they are concentrated in fields with low pay and the need to work in person. Interestingly, the U.S. Bureau of Labor Statistics reported 8.7 million unemployed persons in July, up significantly from 5.7 million in February 2020 (the month before the pandemic).
So it's confusing to simultaneously observe labor shortages and higher-than-usual levels of unemployed. Blame it on the unprecedented circumstances caused by the spread of COVID-19. Some folks are hesitant to take jobs that require them to come into close contact with colleagues or customers. Add to that the generous unemployment benefits and ongoing fiscal stimulus measures, and folks are perhaps feeling less urgency to work. On top of all that, many kids have been learning from home, requiring at least one parent to stay and care for them.
Now, with coronavirus infections caused by the delta variant surging, the pandemic may well continue at least a while longer. Some companies deal with labor shortages by raising wages, boosting benefits, or combining both -- biting into profits and potentially hurting shareholders.
However, here are three stocks that should be immune from shortages in labor.
Airbnb (NASDAQ:ABNB) is a global travel facilitator. It brings together hosts and those looking to travel on its platform. Airbnb was devasted by the pandemic, which nearly halted the travel industry. In 2020, it generated revenue of $3.4 billion and an operating loss of just about the same amount because of the pandemic. But results have been improving this year. In the latest quarter ended June 30, operating results were about flat.
In stark contrast to hotels, Airbnb does not require employees to be on-site to welcome guests and maintain structures. In that way, it is not only immune from labor shortages, but it can actually benefit from them.
Guests visiting hotels that are short-staffed and provide poor service could get so upset that the next time they travel, they will choose Airbnb instead. The stock is trading at a forward price-to-sales ratio of about 16 and is certainly not cheap. However, its asset-lite business model with a limited need for employees could be one reason for the premium price tag.
DraftKings (NASDAQ:DKNG) offers daily fantasy sports, mobile sports betting, and iGaming. DraftKings is still investing heavily in growth. In 2020, the company had revenue of $615 million and an operating loss of $843 million.
Again, because its services are offered online, it does not need to greet guests at a casino, staff blackjack tables, and hire cashiers. In my visit to Las Vegas in early July, labor shortages were everywhere. Pools were closed because there were no lifeguards, eateries were only open part of the day, and lines at cashier windows were extended.
Folks turned off by a poor gaming experience could decide to join DraftKings while labor shortages continue -- and if they like the experience enough, they may turn into long-term customers. DraftKings is trading at a forward price-to-sales ratio of about 16. Again, the potential for higher profits with fewer employees needed could justify the expensive price.
Roblox (NYSE:RBLX) is a human co-experience platform. To put it simply, it's a world that exists online that millions of players join from around the world. It's especially popular with those under 13. Roblox is spending to grow its player network and had revenue of $924 million in 2020 and an operating loss of $266 million.
Roblox allows outside developers the opportunity to create experiences and items for the platform. Once created, developers earn money as players on the site visit their creations or purchase the items. All of their work can be done online and does not require them to be in close contact with customers.
Roblox is trading at a forward price-to-sales ratio over 17, even more expensive than the two stocks mentioned above. A common theme is becoming apparent. If investors want to own companies that are immune to labor shortage, they may have to pay up for it.
Airbnb, DraftKings, and Roblox are not constrained by employee shortages because of the pandemic. Compare that to others like Chipotle or Starbucks, which will likely continue to face hiring challenges. The latter two companies have each announced increases in wages and employee benefits to attract more applicants and retain existing staff. Many of these positions require employees to come into close contact with staff or colleagues, raising the risks of contracting COVID-19.
Investors considering how a business will evolve as the world moves through phases of the pandemic should consider labor attractiveness. After all, customer demand doesn't mean anything if you can't fulfill that demand.