Growth stocks have been feeling the squeeze of macroeconomic pressures lately.
With inflation still coming in hot, the Federal Reserve raising interest rates in hopes of getting the situation under control, and the possibility that 2023 will play host to a prolonged economic downturn, investors have broadly turned away from companies with forward-looking valuations.
While macroeconomic volatility may continue to shape the state of the market in the near term, the silver lining is that some companies with fantastic long-term prospects have seen their valuations pushed down to levels that open the door for market-crushing returns.
With that in mind, read on to learn about two beaten-down stocks that two Motley Fool contributors think will deliver big wins for investors.
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Amazon is still one of the best companies in the world
Keith Noonan: The last year has been a historically bad one for Amazon (AMZN -1.65%) stock. Facing a slew of macroeconomic headwinds and business-specific challenges, the company's share price has slipped roughly 51% over the last 12 months -- and it's now down 55% from its high.
But while the market seems to have given up on the e-commerce and cloud-computing titan, now actually looks like a great time to invest in the company. It seems clear that the business's near-term outlook will be defined by some significant headwinds, but Amazon stock offers long-term investors potentially massive upside at today's prices.
AMZN PS Ratio (Forward) data by YCharts
On the heels of big sell-offs, Amazon's forward price-to-sales multiple has been pushed below 1.7, and the company looks attractively valued even in the context of slowing sales growth.
With high operating costs hurting profitability and management's midpoint guidance calling for revenue to increase just 4.8% in the fourth quarter, it's not shocking that bearish sentiment surrounding the company has increased. But Amazon will most likely return to days of much stronger earnings and sales growth, and investors have an opportunity to build a position in a great company at a great price.
While inflationary pressures and comparisons to periods when pandemic-related conditions created elevated demand are hitting the e-commerce segment hard right now, Amazon's online retail business still has massive long-term potential.
Between increased warehouse automation and the rise of autonomous delivery vehicles, the company's market-leading e-commerce unit should become much more profitable over the long term. And in the meantime, the company's market-leading cloud infrastructure business will likely continue to serve up solid sales growth and strong margins, and its fast-growing digital advertising business still has plenty of room for expansion.
Near-term challenges are causing the market to overlook Amazon's strengths, and investors have an opportunity to capitalize on the oversight.
Consumers are unleashing pent-up demand to travel
Parkev Tatevosian: Despite improving prospects in 2022, Airbnb's (ABNB 0.10%) stock is down roughly 61% from its high. The worldwide travel facilitator has been caught up in the broader stock market malaise. However, after falling considerably in the aftermath of the pandemic, Airbnb's business has exploded.
Indeed, revenue fell by 29.7% to $3.4 billion in 2020 but jumped by 77.4% to reach $6 billion in 2021. So far, in 2022, revenue has expanded by 70%, 57.6%, and 28.9%, respectively, in the first three quarters.
After being cooped up at home for more than a year, folks are unleashing pent-up demand to travel.
Since Airbnb does not own or operate any of its platform's listings, the revenue jump has been a boon to profits. In the quarter that ended in September, operating income reached $1.2 billion, compared to $852 million in the same quarter in 2021 and $441 million in the comparable quarter in 2020.
Worldwide spending on hotels and resorts peaked at over $1.5 trillion in 2019 before the COVID-19 outbreak. That crashed below $1 trillion in 2020 and 2021. Even as it rebounded in 2022, overall spending on hotels and resorts is forecast to be over $400 billion below the peak in 2019.
That means there is significant room for the industry to rebound, and Airbnb could ride that tailwind higher.
ABNB Price to Free Cash Flow data by YCharts
Airbnb's stock is a relative bargain, trading at a price-to-free-cash-flow ratio of 17.5. Investors will do well scooping up this stock with excellent prospects at a reasonable price.
Amazon and Airbnb are great long-term buys
While it's possible that macroeconomic challenges or other curveballs could throw Amazon and Airbnb for a loop in 2023, these two companies remain remarkably well positioned for the long term. Each business has category-leading service offerings and has proven capable of overcoming challenges and scaling rapidly.
For long-term investors seeking beaten-down growth stocks trading at attractive levels, Amazon and Airbnb are top-tier investment candidates that could help push your overall portfolio to market-beating returns.
