Growth stocks are falling out of favor with investors in 2022. Interest rates are rising quickly, a trend that makes the present value of future cash flows worth less.
Despite how the market feels about growth stocks, Apple (AAPL +0.01%), Roblox (RBLX +2.70%), and Airbnb (ABNB +0.73%) are operating excellent businesses that seem unstoppable. Their stocks are already trading at discounts after the sell-off. Investors should consider adding these three growth stocks if the market crash gains further momentum. Here's why.
NASDAQ: AAPL
Key Data Points
Apple has decades of proven innovation
Apple's business is centered around a unique capability to deliver innovative consumer technology products that drive billions in sales -- starting with the Mac computer, iPod, iPhone, iPad, Apple Watch, AirPods, and more. What's important for investors is that it has repeatedly proven that it can innovate. That makes it likely it can sustain robust revenue and profitability for the long term.
AAPL PE Ratio data by YCharts
From 2019 to 2021, Apple's sales bounced from $260 billion to $366 billion while growing earnings per share from $2.97 to $5.61. Apple is trading at a price-to-earnings ratio of 22 and a price-to-free-cash-flow (P/FCF) multiple of 21.
NYSE: RBLX
Key Data Points
Roblox is a pioneer of the metaverse
Roblox operates a platform where players can virtually interact with each other and the environment -- in other words, a metaverse. It has grown to boast 53.1 million monthly active users as of April, a 23% increase over the prior year. It's free to join and use, for the most part. Roblox makes money by selling Robux, an in-game currency required for premium items.
RBLX Cash from Operations (Annual) data by YCharts
Roblox has chosen to outsource those creations, a business model that has helped it deliver robust cash flows for the last two years. Roblox thrived at the pandemic's onset, when millions of kids -- its most popular cohort -- were spending more time at home. Economic reopening is creating headwinds for Roblox, which, in addition to the growth stock sell-off, has caused its stock to crater. Selling at a P/FCF multiple of 31, it's nearly the cheapest it's ever been.
Airbnb offers travelers more options
Like Roblox, Airbnb runs an asset-light business model that has been helpful to its ability to generate free cash flow. Instead of building, owning, and operating the listings on its platform, Airbnb induces others to list rentals. Airbnb takes a percentage of the booking value of each transaction on its website.
NASDAQ: ABNB
Key Data Points
Additionally, by letting hosts list properties on the platform, Airbnb sources a unique set of properties unavailable from traditional hotels. This means that on Airbnb, travelers can book a room inside an apartment or an entire home, depending on their needs for the particular stay. Revenue exploded by 77% for Airbnb in 2021, highlighting that it is gaining favor with travelers.
ABNB Cash from Operations (Annual) data by YCharts
Also like Roblox, Airbnb is trading near its lowest P/FCF multiple at 25.
Robust growth at an excellent price
Each of the three stocks mentioned above has delivered excellent growth, indicating continued expansion in future years. Fortunately or unfortunately, depending on your perspective as a shareholder or potential investor, the growth stock sell-off has these businesses trading at substantial discounts to where they were only months ago.
They could become even better values if a further crash pushes prices still lower. Investors should put Apple, Roblox, and Airbnb on their watch lists and consider adding them to their portfolios in the event of a continued market slide.
