The new year is here, and there's an almost daunting array of moves for investors to consider making at the start of 2023. Market volatility has been the name of the game lately, but taking a buy-and-hold approach with the right companies still provides one of the simplest, most dependable avenues to long-term wealth creation.
With that in mind, read on for a look at two stocks that are worth buying this January -- one trading at value-level prices that's paying a big dividend, and one that's a growth stock with the potential to be a huge long-term winner.
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1. AT&T
AT&T (T -0.03%) is emerging from headaches created by its big media spinoffs and getting back to being a telecommunications pure play. With the stock trading at low price-to-earnings multiples and offering big dividend yield, the telecom company stands out as an attractive, low-risk stock capable of delivering strong returns in an otherwise volatile market.
T PE Ratio (Forward) data by YCharts
AT&T now pays a dividend yielding roughly 5.9% and is valued at just 7.3 times expected forward earnings. But to be fair, these attractive metrics don't tell the whole story.
AT&T has been paying down debt lately, but it still carries roughly $131.3 billion in net debt on its books. While the telecom's heavy debt load in a rising interest-rate environment is likely keeping some investors on the sidelines, the company actually made some smart moves to restructure debt at times when rates were low, and 95% of its outstanding debt is at a fixed rate. And crucially, the core business looks to be moving in the right direction.
AT&T's wireless revenue rose 5.6% year over year in the third quarter, and its broadband segment saw revenue increase 6.1%. With 338,000 net new subscribers for AT&T Fiber in the quarter and 708,000 net postpaid phone subscription additions, the company's high-end connectivity services are showing strong momentum. And, the business may have underappreciated growth opportunities outside its core offerings.
While the Internet of Things (IoT) revolution is much slower to pan out than many industry watchers and analysts initially expected, 5G services tailored toward businesses and IoT functionality remains a compelling growth opportunity for AT&T. The company has now reached more than 100 million connected devices and been particularly successful in the connected-car space, having now added more than 1 million connected cars to its network for 30 consecutive quarters.
For investors seeking high-yield stocks priced at levels that also leave room for substantial capital appreciation, AT&T is a smart buy.
2. Airbnb
Despite impressive business performance, Airbnb's (ABNB -0.22%) valuation crumbled over the last year. The short-term rental company's share price has fallen 51% over the last year. It's also down 41% from market close on the day of its December 2020 initial public offering and 61% from its lifetime high.
Airbnb's business performance has actually been phenomenal. Aided by the summer travel season, the third quarter is typically its best earnings period, and the company certainly didn't disappoint. Revenue rose 29% year over year to roughly $3.3 billion, net income increased 46% to hit $1.2 billion, and free cash flow (FCF) surged more than 80% to reach $960 million.
The company beat Wall Street's top- and bottom-line targets for the quarter, outperforming along most key metrics, but guidance for sales growth to decelerate to roughly 20% in Q4 helped spur pullbacks for the stock.
In addition to macroeconomic pressures, including high inflation and rising interest rates depressing its share price, Airbnb is seeing signs that a more challenging economic backdrop will lead to slower growth in the near term. Guidance for decelerating sales growth helped trigger another round of sell-offs following the Q3 earnings release, and the company's share price continued to move lower amid bearish pressures impacting the market at large.
But are Airbnb's best days already behind it? Not even close.
Airbnb's core business continues to have a very promising long-term sales growth outlook, and its 41% free cash flow margin over the trailing-12-month period shows that the company can be a cash-generating machine.
Airbnb is scaling profitably and remains in the early stages of tapping a massive market opportunity, and the company stands out as a fantastic investment candidate for long-term investors.
