The market has been off to a mixed start for 2023, and investors may face more headwinds ahead if the economy takes a downturn in the coming months. However, even amid bearish periods in the market, history has taught investors time and time again that there are still eye-catching opportunities to invest in and stay invested in for the long term.
While staying invested in the market through its highs and lows may feel challenging in the moment, it's much better than trying to guess when the dips and peaks will be. Instead of market-timing, investing in all environments means you can be ready to experience the best days of the market when they do come.
If you're building your portfolio with positions in more great companies in January, Pinterest (PINS -1.58%) and Etsy (ETSY -0.36%) are two companies you may want to consider adding to your buy list. Here's a closer look at the investment opportunity each of these companies provides.
1. Pinterest can endure despite recession fears
Pinterest has felt the impact from the choppy markets of the past year like most other growth stocks. This is evident by the 17% decline in Pinterest stock over the past 12 months. However, this dip could present a prime opportunity to buy Pinterest stock at a discounted valuation. The opportunity is particularly enticing given the company's ability to grow its business and augment shareholder returns over the long term.
In the third quarter of 2022, Pinterest's total revenue jumped 10% year over year on a currency-neutral basis; it was actually up 35% on a three-year basis. Its global monthly active user (MAU) count of 445 million was flat year over year. This is a key metric that has slowed in recent quarters and caused some investors to sell off the stock, but MAUs actually rose 3% on a sequential basis. Meanwhile, global users were still up 11% in the third quarter of 2022 compared to Q3 2019, which is a sign that growth remains steady from pre-pandemic levels.
Pinterest's platform is something of a novelty in the world of social media stocks. Unlike many popular platforms in the digital age, Pinterest doesn't rely on walls of text or facilitate the same type of user connections that many social media sites do. Instead, its image search-and-share design is designed to attract and retain user eyeballs for hours, without the same onslaught of content that digital users have become accustomed to on other platforms.
Users flock to Pinterest for visual inspiration about everything from home decor to recipes to fashion to travel content. In addition to relevant "pins," users are also met with an array of eye-catching advertisements in the form of videos and images for products and services that align with the original search. Pinterest is essentially an ad machine, but it doesn't feel like one at first glance. Even with ad spending coming down in recent quarters, management noted that shopping-ads revenue alone was up 50% year over year in the most recent quarter.
The platform's image and inspiration-focused design appeals to consumers in a wide range of economic environments, and users will continue to use Pinterest whether or not a recession comes. That ability to retain and monetize users over the long term is a key tailwind for the company that can outlast any temporary pullback in ad spend that could occur in a difficult economic period. This makes it a wise prospective buy for long-term investors building a well-diversified portfolio.
2. Etsy's niche focus enables long-term growth narrative
Etsy has seen some investors shy away in recent months, particularly as worries about discretionary spending and a murky macroenvironment have inflicted headwinds upon the broader e-commerce space in general. There's no denying that a recession, or even the ongoing reality of inflation which, while declining, is doing so at a relatively modest pace, is naturally impacting how consumers spend their hard-earned cash.
However, if you're investing in stocks for anywhere from five to 10 years or longer, these remain relatively short-term headwinds to the growth of the e-commerce space. Regardless of what happens in the next 12 to 16 months, consumers are and will continue to spend money online. The convenience and ease of online shopping is a sticky point for consumers, which is why it's no surprise that the e-commerce industry is still expected to hit total sales of roughly $7.4 trillion globally by 2025.
For a company that has carved its very own niche in the lucrative world of e-commerce with an innovative platform focused on vintage and unique items, Etsy's footprint in this expansive market is a green flag for the long-term potential of this business. Certainly, growth has slowed in recent quarters from its pandemic height, but it would have been somewhat unreasonable, not to mention unsustainable, for that trajectory to continue indefinitely.
Still, the company is continuing to mark victories on a number of key fronts that bode well for its future growth story. In Q3 2022, the company reported revenue of $594 million, gross merchandise sales (GMS) of $3 billion, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $168 million. These figures represented increases of 200%, 150%, and 300%, respectively, from the same quarter in 2019.
Meanwhile, as of Q3, 51% of active buyers shopped on the platform at least once a year, while its cohort of repeat buyers -- which totaled a whopping 43 million in Q3 -- purchased goods on the platform at least five times a year. Habitual buyers (those who bought items on six or more days and spent more than $200 in the trailing 12 months) bought goods on the platform an average of 13 times a year, accounting for 46% of Etsy's entire Q3 GMS. For long-term investors, Etsy's current discounted valuation could pose a particularly attractive buying proposition given the company's continued successes and durable growth story.
