In a market fraught with volatility, most investors have found their fortitude being tested more than usual of late. However, if you're investing in quality businesses with strong, durable growth potential, the near-term market shouldn't put you off from continuing to build your portfolio around your long-term financial goals.
If you have capital to put into the market right now, here are two monster stocks that could soar in the new year. But even more importantly, they can enrich investors' portfolios for years to come.
1. Airbnb
Airbnb (ABNB -3.18%) made a name for itself in a highly crowded travel industry with the individuality and innovative qualities of its platform. The idea of apartment-style living for vacations or long-term travel didn't originate with Airbnb. But it built on this model at a scale that has enabled a prolonged, healthy recovery from the intense slowdown of the pandemic, leaving many other travel companies in the dust.
One thing that makes Airbnb unique is that it has something to offer everyone. Whether you want to stay in a castle in Tuscany, a studio apartment in New York City, or a cabin in the Smoky Mountains, there's a place for you.
From just a few nights to months at a time, travelers can choose the type of stay that works for them while enjoying apartment-style amenities they might not find in the average hotel. And with more and more people working remotely, they are taking advantage of not being tied to any one location for extended periods.
The recovery of cross-border travel is a significant growth element for Airbnb. But management also aims to capitalize on broader societal changes over the last few years, such as the rise of remote work, that are enduring growth catalysts.
It all creates a variety of opportunities beyond traditional types of travel, and its business model could prove remarkably resilient in the event of a global recession.
The company is also well positioned financially against near-term headwinds. Airbnb set multiple records in the third quarter of 2022, reporting its most profitable quarter ever as well as the most quarterly revenue.
Revenue of $3 billion and net income of $1.2 billion represented increases of 30% and 46%, respectively, from the third quarter of 2021, and jumps of 70% and 260% from the third quarter of 2019. Meanwhile, the company had amassed a stockpile of cash and investments totaling about $10 billion at the end of the third quarter, aided by $966 million in free cash flow generated in the period.
Airbnb's core business is incredibly compelling in the current environment, for consumers with all types of travel needs and for hosts seeking extra income in an uncertain economy. The strength of that business, coupled with a continuing recovery that outpaces many of its peers, promises long-term growth long after any recession has passed.
2. Chewy
Chewy (CHWY 0.19%) is an online pet products retailer, but animal food is just a sliver of its overall business. The company sells thousands of products for all types of pets, as well as for farm animals like horses, chickens, pigs, and goats.
Despite a supply chain that remains in flux, Chewy managed to stave off many of the issues facing large retailers today with its network of fulfillment centers, three of which are automated. The company also plans to build two more automated fulfillment centers in the next 12 to 18 months. These centers shorten processing and fulfillment times (and therefore wait times for consumers) while saving significant operating costs.
Already, roughly 30% of its orders are processed through these automated fulfillment centers. Chewy has also expanded into other lucrative segments of the broader pet market, including healthcare.
The company has partnered with well-known names like Trupanion and Lemonade to provide a variety of insurance options for pet owners. It has a telehealth service, which allows pet owners to connect with a veterinarian via chat or video call. And the company recently launched its first private-label pet wellness brand, a line of supplements called Vibeful.
Chewy sells its own products as well as other brands, and pet owners can get medications through its online pharmacy.
The pet wellness space was a logical next step. In the third-quarter earnings call, CEO Sumit Singh noted that nonprescription pet health and wellness products alone make up a total addressable market of more than $2 billion.
Chewy is also steadily growing its revenue and is profitable. The company's net sales jumped 15% year over year to $2.5 billion in the third quarter.
Its Autoship program is seeing increased adoption by pet owners, and comprised more than 73% of the quarter's net sales. In total, Autoship sales in the third quarter jumped nearly 20% year over year. And gross customer additions for the three-month period were up 9% compared to pre-pandemic levels in the third quarter of 2019, while rising 6% from the prior quarter.
Spending is only expected to grow in the years ahead with the rise of pet ownership. Chewy's business, which serves virtually every need of a pet owner, can benefit from these tailwinds over the long term, and so can its shareholders.
