For long-term investing, $5,000 is an excellent starting point, and if you have that amount available to put to work for your savings after debts are paid and an emergency fund is set up, you have a good chance of seeing that nest egg grow over the next 20 years.
Growth stocks aren't growing so much these days, but if you have 20 years to wait, the market should reward you many times over. You can view the current market as full of opportunity and pick up shares of some super growth stocks while prices are low. Revolve Group (RVLV -3.33%), RH (RH -3.58%), and Airbnb (ABNB 0.01%) are stocks with loads of potential that are priced for purchase right now.
1. Revolve Group
Considering how the apparel industry has been faring over the past few years, savvy investors will note how trends are shifting and grab the opportunity to follow the leaders. Clothing is a baseline essential need on the hierarchy, although it would be hard to tell based on how poorly many apparel companies are doing today.
Some business is going to athleisure companies like Nike and Lululemon Athletica, but as formal fashion makes a rebound, companies that speak to shoppers in their language could be the biggest beneficiaries. That's where Revolve comes in. It markets high fashion for millennial shoppers. Its digital focus, combined with fashion-forward styles, frequently changing products, and social media marketing, set it apart from its peers.
This has led to skyrocketing sales and increasing profits. In the first quarter, revenue rose 58% year over year and earnings per share ticked up 1%. Active customers increased 38% over the trailing 12 months, and average order value increased by 13%. It's also seen even better success with its high-fashion sister site, FWRD. Luxury items have higher margins and an upscale, more resilient client base, giving the company more stability when times get tough.
Can Revolve keep it up? It increased its marketing spend significantly in the first quarter versus 2021, going from $26 million last year to $45 million this year, and selling and distribution expense made a similar climb. Sales growth is likely to slow down in the inflationary atmosphere, and margins are already contracting as a result.
Revolve stock is down 46% in 2022, and the shares trade at only 21 times trailing 12-month earnings. There might be some short-term pressure here as the market takes current economic conditions into account, but this stock could explode when the market turns around.
In many ways, RH is similar to Revolve. It has a robust online presence and targets an upscale crowd, powering its profitability and giving it resilience when most shoppers are watching their spending.
However, physical stores are an important element of its business. The company has a small collection of museum-like showrooms in upscale neighborhoods, and management is looking to create a brand based on its products that includes experiences as well. These comprise a branded luxury hotel, as well as yachts, jets, and restaurants. This was going along a positive trajectory until the latest macroeconomic challenges.
In the first quarter, sales increased 11% over last year, and earnings jumped 190% to $12.16 per share. But at the same time that other retailers felt margin pressure, RH's gross margin expanded nearly 0.05%, and its adjusted operating margin widened by 2.1%. Management said it expected declining revenue in the second quarter and flat growth for the year, and adjusted operating margin from 23% to 24%.
At the end of June, the company gave a downbeat update, saying that it was being impacted more than expected from changing macroeconomic conditions. As a result, RH cut its full-year guidance to a 2% to 5% sales decline and lowered its operating margin to a range of 21% to 22%.
RH's already suffering stock fell on the news, but it has since bounced back, at least to where it was before. It's now down 48% this year, and investors seem to think that's enough. Management was clear in its direction, saying it will not put items on sale to clear out inventory in order -- a move that might dilute its branding.
That inspires confidence. Short-term pressures are weighing, but RH, which happens to be a Buffett stock, has tons of long-term potential.
Airbnb has been one of the biggest winners of the pandemic recovery phase. After severe declines when travel was disrupted, it has come back to full force and is even thriving despite travel still being curtailed. Its ability to be nimble and adapt to any travel atmosphere bodes well for its long-term viability and dominance as a travel leader.
Since travel has started to resume, there have been all sorts of ways Airbnb is demonstrating its strength. Nights and experiences surpassed 100 million for the first time in the first quarter, and more customers are booking earlier. Revenue increased 70% over last year, and operating cash flow nearly doubled from $618 million last year to $1.2 billion this year, due to revenue increases and margin expansion. Not only does this company have a well-executed model, management is also running an increasingly efficient operation.
Long stays, which are 28 days or more, continue to be the company's fastest-growing category as people move toward remote work, and this is a tailwind for continued growth in this phase. Airbnb is feeding demand through growing its host network and listings, and non-urban listings increased 15% over last year in the first quarter. That's a lot faster than competing travel companies can grow their offerings, all while Airbnb remains asset-light as a platform, not having to sink costs into real estate and building materials.
Airbnb stock was highly valued from the get-go when it debuted on the stock market at the end of 2020. Even now -- down 35% in 2022 and trading 18% below its first-day trading price -- the shares are not cheap, trading at 50 times forward one-year earnings. However, in 20 years' time, Airbnb stock could skyrocket.