Robinhood has become the preferred brokerage for many investors due, in part, to unique features like its list of most popular stocks. As with other types of popularity contests, what's most popular isn't always what's best. Investors should dig deeper to find the companies on the list that have the most market-beating potential.
Two companies stand out to me as being particularly good, market-beating investments right now: Walt Disney (DIS -1.01%) and Airbnb (ABNB 0.10%). These two stocks have potential for different reasons, so let's dig in and see why.
Image source: Getty Images.
Walt Disney
The decline of Disney's stock at the onset of the pandemic was no surprise. With shutdowns taking place worldwide, Disney's "parks, experiences, and products" segment revenue dropped 37% in 2020 compared to 2019. Luckily, the launch of the Disney+ streaming service helped increase revenue in the direct-to-consumer segment by 81%, blunting the impact of the parks' closure.
Overall, Disney has navigated a very challenging period quite well. In the recently reported first quarter of 2022, revenue was $22 billion, and net income was $1 billion, representing a return to the company's pre-pandemic results. Breaking even over a two-year span would normally not be something to celebrate, but in this case, it's pretty remarkable.
Disney is poised for a nice run as we continue through 2022. In Q1, Disney's "parks, experiences, and products" revenue increased 102% year over year. Even more impressive is that this growth occurred despite reduced capacity in many of Disney's parks. Management also pointed out that per-capita spending at domestic parks was up more than 40% vs. Q1 2019. Park-goers are coming back, and they're spending more as well.
While the parks business should show a nice recovery in the coming quarters, Disney's streaming services are posting strong growth as well. Year-over-year subscriber growth for Disney+, ESPN+, and Hulu was 37%, 76%, and 15%, respectively.
Disney is currently trading for only three times sales, around where it was before the pandemic. So essentially the stock is valued at the same multiple as before the launch of Disney+, which has become one of the top streaming services. Considering how cheaply the market is valuing the company, now is a great time to pick up shares for a market-beating return.
Image source: Getty Images.
Airbnb
After going public in December of 2020, Airbnb's stock has had quite a ride with its share price trading as high as $216 and as low as $125 over the past year-plus. However, over that same time frame, Airbnb's business has been doing quite well.
|
FY 2020 |
FY 2021 |
YOY |
|
|---|---|---|---|
|
Nights and Experiences Booked |
193 million |
301 million |
56% |
|
Gross Booking Value |
$24 billion |
$47 billion |
96% |
|
Revenue |
$3.3 billion |
$5.9 billion |
77% |
|
Net Loss |
$(4.6) billion |
$(352) million |
92% |
Data source: Company filings. YOY = year over year.
As the chart shows, fiscal 2021 was a strong year for Airbnb, both in terms of financial performance and customer metrics. Expanding a bit on the nights and experiences booked, nearly half of the nights booked in Q4 were for stays of 7 days or longer. Additionally, 20% of all nights booked were stays for 30 or more days. Management thinks this is reflective of a change in remote work, leading people to work from new destinations for weeks, months, or years at a time. Longer stays are important for both Airbnb and its hosts, who are an important part of the business.
Despite these strong results, Airbnb's stock is down over 20% from its 2021 highs and currently trades at a price-to-sales ratio of 18. While that's not exactly cheap, it is near the lowest it's ever been. Airbnb is one of the companies that are top of mind whenever people think about travel, and its performance shows it's providing a value for its customers that keeps them booking more and more nights. Considering the discount it trades at now, this is one Robinhood stock that has massive market-beating potential.
