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Don't Wait for a Stock Market Crash. These 3 Stocks Are Good Buys Right Now

By Jason Hawthorne, Jon Quast, and Keith Noonan – Sep 5, 2021 at 6:10AM

Key Points

  • To get outside during the pandemic, many flocked to the water.
  • This game maker combines a high-quality business with a cheap stock price.
  • After unprecedented headwinds, this business is looking stronger than ever. 

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Snap them up while you can.

If you are waiting for stocks to go on sale, join the crowd. For the last few years nearly everyone has screamed about the market being overvalued, interest rates being too low, and how it would all come crashing down. It hasn't happened.

We asked three contributors to Fool.com which stocks they would recommend to those who are still waiting for a pullback. They came back with MarineMax (HZO 2.20%), Zynga (ZNGA), and Airbnb (ABNB 7.09%). Here's why they think it's time to buy these companies now.

A long line of people  standing outside on a cobblestone road waiting.

Image source: Getty Images.

Cruising to another decade of growth 

Jason Hawthorne (MarineMax): As the pandemic forced family leisure activities outdoors, one way many adapted was to get on the water. Boat sales climbed 12% year over year to a 13-year high in 2020. The percent of first-time boat buyers also rose, which hadn't happened in more than a decade. That sets MarineMax -- the world's largest recreational boat and yacht retailer -- up for success in the years ahead.

The company doesn't just sell boats. It operates 31 marinas and storage facilities, provides brokerage and charter services, and offers insurance. Unlike boat sales, which are infrequent transactions, MarineMax's services are generating recurring revenue for the lifetime of the boat. Even before the pandemic, management was doing a stellar job increasing high-margin service revenue. It shines through when you see how gross profit has grown faster than sales. 

HZO Revenue (TTM) Chart

HZO Revenue (TTM) data by YCharts

Management has raised earnings guidance for fiscal 2021 multiple times. It originally forecast $4.10 per share at the midpoint. That would have been impressive 20% growth. It's now calling for $6.47, or 58% growth.

The good times aren't likely to end anytime soon. At least one manufacturer has said it could be two or three years before it catches up with demand. Wall Street doesn't see it that way. The company is trading at a price-to-earnings ratio of 7.6. That's the lowest it has been in years, excluding March 2020's market collapse.

It's why MarineMax is a great stock for investors waiting for a market crash. Despite the stock market making all-time highs, its shares appear to be dirt cheap. And the boom in boat sales will keep generating profits for years to come. 

A gaming company with non-gaming upside

Jon Quast (Zynga): If you're hoping for a market crash, I'm willing to wager that you're looking for a bargain. However, a word of caution with so-called value stocks: Not everything that's cheaply priced is a great business to own for the long haul. But fortunately with mobile-gaming company Zynga, you can get both quality and value right now. No need to wait for a market crash.

Zynga is a quality company for a couple reasons. First, the company had over 205 million monthly active users as of the second quarter of 2021, up 192% year over year. That's a big jump. But this user growth isn't a one-hit wonder -- the company has shown steady sequential user growth for some time.

Moreover, Zynga has a vast library of game titles in its portfolio. Many, like Farmville, have been around for over a decade, providing the company with a recognizable title to launch new content and boost user engagement over time. 

In short, Zynga is a quality company because its core business is stable and it's finding ways to grow. But Zynga is also a value stock right now. As of this writing, the stock is down roughly 28% from its high despite achieving record quarterly revenue in Q2. And because revenue is up and the stock is down, Zynga currently trades at its cheapest price-to-sales valuation in three years.

I believe Zynga stock represents both quality and value, but the real question is whether it can beat the market from here. And there's one big reason I believe it can. Consider that the company monetizes its users in two ways. It generates revenue when users buy things in the games. But it also monetizes users by showing ads.

Digital advertising is one of the great secular trends that I believe all investors should be investing in right now. Two things are happening on a grand scale. First, advertisers are switching to digital channels in droves because results are measurable, driving a better return on investment. Second, because of this surging demand, ad slots from companies like Zynga are in short supply, creating skyrocketing revenue streams.

In Q2, Zynga's ad revenue was up 110% year over year, a great improvement. But consider the company closed on its acquisition of ad-tech company Chartboost in August. This brings advertising technology in-house, potentially growing revenue further while simultaneously increasing profit margins.

In summary, Zynga is partly becoming an ad-tech company, which provides plenty of upside as the digital disruption of advertising picks up steam.

This travel industry innovator is just getting started

Keith Noonan (Airbnb): The coronavirus pandemic and related travel restrictions have put a serious hampering on the tourism and hospitality industries since early in 2020. However, Airbnb has managed to put up relatively impressive performance across the stretch, and it looks primed to be a huge winner over the long term. 

Airbnb's second-quarter revenue surged nearly 300% as pandemic-related restrictions and concerns eased in many territories. Last quarter's huge sales increase shouldn't come as a big shock given the uncharacteristically weak basis of comparison, but Q2 revenue was also up 10% compared to sales in the second quarter of 2019.

Airbnb is already putting up better sales than it was managing in the pre-pandemic era, and it looks like the company is poised for more strong growth. The company's asset-light business model is allowing it to post impressive gross margins, and the business stands a good chance of delivering impressive earnings growth down the line. 

The short-term vacation rental company has become virtually synonymous with its service category, and its easy-to-use platform and strong brand should help the business capitalize on the travel industry's recovery and long-term growth. New users are still flocking to the platform, and Airbnb's push into the local experience and events booking space is helping it boost average spending per customer. It's also positioned to continue capitalizing on work-from-home and digital-nomad trends.

With a market capitalization of roughly $99 billion and the company valued at roughly 17.5 times this year's expected sales, Airbnb admittedly has a growth-dependent valuation. That characteristic could prompt the stock to see a substantial pullback if the broader market takes a bearish turn.

However, as the old saying goes, "time in the market beats timing the market." Airbnb offers attractive upside at current prices, and I think it will go on to deliver big wins for patient investors.

Keith Noonan owns shares of Airbnb, Inc. and Zynga. The Motley Fool owns shares of and recommends Airbnb, Inc. and Zynga. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Airbnb Stock Quote
Airbnb
ABNB
$102.14 (7.09%) $6.76
Zynga Stock Quote
Zynga
ZNGA
MarineMax Stock Quote
MarineMax
HZO
$33.03 (2.20%) $0.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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