Investors may be navigating turbulent market waters at the moment, but that doesn't change the fact that the stock market remains a compelling place to build financial wealth. And if you're investing in stocks for decades, even a few years of extreme volatility shouldn't veer you off course or deter you from working toward your long-term financial goals.
As long-term investors formulate their list of potential buys to start the new year off, here are two top-notch stocks trading at a discount that investors will want to buy and hold for years.
1. Airbnb
Airbnb (ABNB 0.75%) navigated the recovery from the worst of the pandemic better than many travel stocks. One of the most striking aspects of Airbnb's recovery is that the company is witnessing notable growth even compared to its trajectory before the COVID-19 crisis escalated. For example, while the third quarter of 2022 saw Airbnb grow its top and bottom line by surging clips of 36% and 61% year over year (excluding headwinds from weak foreign currencies), these metrics were up 70% and 270% compared to the same quarter three years ago.
Airbnb is witnessing strong recovery both in cross-border and urban travel in key markets, as well as an increasing number of users flocking to non-urban travel destinations. Meanwhile, long-term stays continue to comprise a notable chunk of stays booked on the platform (20% as of the third quarter) and are the fastest-growing of all Airbnb's categories. The fact that more people have the flexibility to work remotely than they did before the pandemic has likely been a key factor here.
The continued rise of remote work in the years ahead could cause more people to look at alternative means of accommodation rather than a regular apartment lease of 12 months or longer. Not only is Airbnb partnering with governments around the world to provide resources that make it easier than ever for remote workers to relocate and find accommodation, but management has said that they plan to upgrade long-term stay offerings in the future as demand for this category remains robust.
At the same time, Airbnb has boosted its incentives for people to host rentals on the platform. These include upgrades to its AirCover program, such as guest identify verification and up to $3 million in available damage protection, as well as the introduction of Airbnb Setup, which enables brand-new hosts to consult with established Superhosts and choose a seasoned Airbnb user for their first guest stay.
A pullback in spending in the near future could occur if economic woes deepen, impacting consumer wallets and, likely, travel spending. However, the versatility of Airbnb's platform can enable it to continue expanding its market share within the travel industry over the next decade and well beyond, which can enrich its balance sheet and shareholders in the process.
2. Lululemon
Lululemon (LULU 1.31%) has amassed a nearly cult-like following as an indomitable leader in the athleisure space in the more than two decades since its founding. It began as a yoga apparel retailer but has grown into an international brand, selling everything from women's and men's apparel to sports footwear to accessories like its well-beloved belt bag. Along the way, the brand trust that Lululemon has built is serving it well in the current environment. That loyalty, and the versatility of Lululemon's products, are driving growth forward even as consumer spending remains in flux and concerns about the economy drag on many retailers' top and bottom lines.
Lululemon recently released preliminary results for the final quarter of 2022, which included a downgrade in revenue guidance and diluted earnings per share, along with a projected decline in gross margin as pressure on consumer spending patterns continues in the current market. However, it's important to point out that even with this guidance, management is still projecting 25% to 27% year-over-year net revenue growth for the final quarter of the year and a rise in diluted EPS to the tune of 26% to 27% from the year-ago period. And management is projecting, at most, a 1% decline in gross margin for the fourth quarter of 2022.
Meanwhile, the company is in the middle of executing a multiyear growth plan. Among a variety of goals, management is aiming to double overall revenue from 2021 to $12.5 billion in 2026 while doubling revenue in its menswear segment and digital channels. Considering that the company's annual revenue and earnings have risen by respective amounts of 90% and 102% over the trailing five-year period, this seems like a feasible goal. The stock has delivered a total return of nearly 300% for shareholders in the past five years.
The global athleisure market hit a valuation of $307 billion in 2021. Taking Lululemon's net revenue of $6 billion that year into account, that would give the company an estimated global market share that hovers right around 2%. Bear in mind that this industry is on track to hit a valuation of $663 billion by the year 2030.
Given Lululemon's rapidly expanding global presence, both in-store and online, the company has a tremendous ability to seize a growing share of this market in the years ahead. Even a relatively small piece of this multibillion-dollar pie bodes well for Lululemon's financial future and shareholder returns over the next 10 years and beyond.
