The stock market is having a forgettable year in 2022. A potential silver lining could be that the sell-off creates opportunities to buy excellent businesses at bargain prices.
Airbnb (ABNB 0.10%) and Meta Platforms (META -10.56%) are great examples. These growth stocks are trading near their lowest valuations ever. Let's consider why each bargain stock could be ready for a bull run.
Airbnb is thriving as folks look to travel
The worldwide travel facilitator was devastated at the pandemic's onset. One of the first things people stopped doing was booking vacations. In fact, they urgently cancelled existing trips they had planned before the outbreak changed everything. Airbnb's revenue fell by 30% in 2020. However, management took the opportunity to streamline the business, preparing it for an eventual recovery.
And now, a rebound is indeed taking shape. Airbnb's revenue bounced higher by 77% in 2021. That's while worldwide spending on hotels and resorts has yet to recover to pre-pandemic levels, highlighting that there is plenty of room for Airbnb to expand.
ABNB Price to Free Cash Flow data by YCharts.
Meanwhile, Airbnb has not been spared from the growth stock sell-off of 2022. Trading at a price-to-free-cash-flow ratio of 25.6, it is near the lowest that investors have been able to buy Airbnb shares.
Meta Platforms has the attention of half the planet
So much talk has been made of Meta Platforms' announcement of investments in the metaverse that it's easy to forget its social media dominance. Nearly half of the planet checks into one of Meta's family of apps -- including Facebook, Instagram, Messenger, and WhatsApp -- monthly. That level of scale is unique to Meta Platforms. Of course, the apps are free to join and use. However, that massive scale attracts marketers who covet access to a large population in one location.
META PE Ratio data by YCharts.
Revenue has exploded from $18 billion in 2015 to $118 billion in 2021. Similarly, its operating income rose from $6 billion to $47 billion in that time. Regardless of that excellent long-term performance, investors have become wary of Meta's headwinds in the near term. Nervous investors have abandoned ship, and Meta is now selling at a price-to-earnings ratio of 13.4 and a price-to-free-cash-flow multiple of 12.6, each near the lowest in the last five years.
Bargain prices and massive opportunities ahead
Competing effectively in a large market is vital for investing returns because it increases the potential for a business. If the industry is small, a company can only grow to the size of the sector, for the most part. To generate growth beyond that, it would need to branch off into other industries where its competitive advantage may not be as potent.
Both stocks above compete in large arenas. Airbnb operates in the worldwide travel and resort market that generated $1.5 trillion in sales in 2019, before the outbreak. Meanwhile, Meta Platforms generates money primarily through advertising, a $763 billion industry in 2021. With such massive opportunities, Airbnb and Meta Platforms are bargain stocks ready for a bull run.
