The new year has arrived, and it's time for me to search out the biggest likely winners in my coverage universe of companies. While no one has a proverbial crystal ball to foresee the future perfectly, here are my five biggest predictions for 2022.
1. The Walt Disney Company
The House of Mouse struggled in 2021 as it continued its rebound from pandemic-caused disruptions. Fortunately, Disney (DIS 2.07%) closed its fiscal year 2021 on a solid note. The year-over-year improvement was especially true for its segment that includes theme parks, which saw revenue almost double in its fourth quarter ended Oct. 3, to $5.45 billion from $2.7 billion in the year-ago period. Moreover, the flourish in the final quarter helped the segment's full-year revenue fall by only 3%, despite operating with pandemic restrictions.
With its theme parks open, and a robust and growing streaming segment, 2022 could be the year Disney's business returns to full strength. The stock is down roughly 10% since it last reported earnings on Nov. 10. I believe the market overreacted to slower-than-expected growth in subscribers at Disney+. Management reiterated its belief that the segment will reach over 230 million subs by 2024, but that the road will be choppy. That would more than double the current subscriber count of 118 million as of Oct. 2. For investors, that's an opportunity to buy the stock when the market is pessimistic following a less-than-stellar quarter.
I expect the stock to improve along with business performance and end higher than it started in 2022.
2. Meta Platforms
The company formerly known as Facebook changed its name to Meta Platforms (META 1.97%) to better reflect its shift to becoming a leading metaverse business. Meta revealed $10 billion in foundational spending on its metaverse initiative, with plans to boost the spending in the coming years. That's giving investors enthusiasm about Meta's stock, because the core social media business was experiencing decelerating revenue growth. It's also encouraging investors because of the vast unknown potential the metaverse industry could have.
Meta's core business is not too shabby either. Revenue increased by 46% in the nine months ended Sept. 30. The company boasts over 3.5 billion monthly active users across its family of apps. As supply chain problems ease toward the second half of 2022, advertisers could ramp up spending on Meta's family of apps. Combining an improving core business and progress toward becoming a metaverse leader is likely to boost Meta Platforms stock higher than it started in 2022.
Education technology company Chegg (CHGG 0.37%) got hammered in 2021 due to college campuses bringing students back for in-person learning. Students did not like the change, and college enrollment decreased substantially. With fewer students taking fewer courses, demand for Chegg's services, which help college students with their curricula, fell.
Still, despite the decrease in demand, revenue increased by 12% for Chegg in its most recent quarter, and subscribers increased by 17% to 4.4 million.
While demand is likely to remain subdued in the first half of the year, it could surge in the second half. That will be for two primary reasons: More students will have gotten vaccinated against COVID-19, and Chegg is in the process of implementing country-specific pricing that will make it more affordable for those outside the U.S. and thus increase subscribers.
Like Chegg, Pinterest (PINS 3.53%) got slammed in 2021. The economic reopening was harmful to its business, which lost 24 million monthly active users in its two most recent quarters. Meanwhile, supply chain constraints held back advertisers who had less reason to market their products if their shelves were empty.
I suspect supply chain bottlenecks will ease in the middle of 2022, and a rebound will follow in advertising from businesses. The increase in the price per ad could offset user losses for Pinterest and boost revenue and profits in 2022.
Worldwide travel facilitator Airbnb (ABNB 1.73%) suffered at the onset of the pandemic, as fewer folks wanted to get on crowded planes to travel to new destinations. However, Airbnb managed to recover from those losses and emerge stronger. In its most recent quarter, revenue was 36% higher than the comparable quarter in 2019.
The rise of the omicron variant may slow Airbnb's business at the beginning of the year, but the world has more tools in its battle against COVID-19. Nearly 10 billion doses of a vaccine against the virus have been administered, and new treatments are available to doctors to help prevent severe outcomes for those who still get infected.
Travel demand could rebound and provide a tailwind for Airbnb as the year progresses.