The market may have investors on a roller coaster right now, but great businesses certainly don't. Even as share prices across many sectors remain depressed from all-time highs, or volatile at best, looking beyond those movements at the businesses behind the stocks is far more revealing in the current market environment.
If you're hunting for smart stocks to add to your basket with 2023 underway, don't overlook these two promising businesses when you hit the buy button.
1. Airbnb
Airbnb (ABNB -0.09%) is evolving to meet the needs of a changing world of travel and travelers, and the proof, as they say, is in the pudding. The company's growth trajectory and recovery from the doldrums of the pandemic continue at a pace that broadly eclipses many other travel-facing companies. This goes back to the diverse range of offerings on Airbnb's platform that cater to just about every type of travel need.
One of the most prominent changes that Airbnb witnessed that continues to propel growth forward -- compared to both pandemic and pre-pandemic levels -- is the rising popularity and use cases for long-term stays on its platform. At the end of 2022, Airbnb reported that long-term stays on the platform of 28 days or more comprised 21% of all nights booked. Meanwhile, stays booked for at least a week comprised 46% of total nights booked in the final quarter of the year.
Of course, the reopening of global borders and the continued recovery in urban and cross-border travel aided in Airbnb's remarkable string of financial reports in recent quarters. But looking beyond year-over-year comparisons, the long-term promise of Airbnb's growth story is even more apparent. Case in point: Airbnb's revenue, gross booking value, and nights and experiences booked in full-year 2022 represented respective increases of 75%, 67%, and 20% compared to full-year 2019.
Beyond the fact that consumers are continuing to spend money on travel even as wallets remain constrained in a challenging economic environment, consumers are also traveling for longer periods, a phenomenon that can be traced back in part to the rise of remote and flexible work. Airbnb is continuing to upgrade its platform offerings to attract a wide range of travelers, as well as improve the experience for the growing cohort of travelers who are actually living in stays booked through the platform.
Airbnb recently upgraded its booking experience for travelers with a new tool that allows users to look at the full price of any given stay from the initial search results. It's also rolled out a series of upgrades for hosts in recent months, including enhancements to AirCover protection like guest identity verification and Airbnb Setup, through which "prospective Hosts can connect with Superhosts for free one-to-one guidance all the way through their first reservation."
Airbnb is positioned to benefit not only from the recovery in traditional travel spending but also from the spending of a new kind of traveler capitalizing on the opportunities available in the digital age, as evidenced by the continued momentum in long-term stays and even urban stays. Given the ongoing potential of this company and the variety of tailwinds driving it forward, investors may do well to take a second look at this top growth stock.
2. Lululemon
Lululemon (LULU -0.48%) remains a leader in the global athleisure space, an industry on track to reach a valuation of $663 billion by the year 2030. From women's and men's athleisure apparel to accessories like backpacks, beanies, and shoes, the brand has become an iconic mainstay popular with consumers around the world.
It's this status among its consumer base that has allowed the athletic apparel retailer to not only amass a considerable following but grow revenue and profits steadily, while enriching investors in the process, a challenging feat in the competitive retail space. While some investors may have been dismayed about management's recent curtailment of its guidance for the fourth quarter of 2022, a look at the bigger picture reveals a far more promising growth story.
Yes, the company decreased its revenue and diluted-earnings-per-share guidance slightly, and is expecting a gross margin decline against the backdrop of a challenging economic landscape. Even so, at the time of the announcement, CEO Calvin McDonald affirmed:
In Q4, traffic remains strong across both physical and digital channels, and we anticipate delivering another quarter of solid earnings growth...2022 has been a strong year for Lululemon, and we remain focused on the significant opportunities ahead as we continue to deliver on our Power of Three x2 growth plan.
Speaking of Lululemon's Power of Three x2 growth plan, this aggressive growth strategy includes plans to expand revenue at a compound annual growth rate of 15% from 2021 to 2026, as well as double men's and digital revenue, and quadruple international revenue. These are goals that Lululemon is on track to handily meet, if not surpass.
In fact, in the third quarter of 2022 alone, Lululemon's revenue jumped 28% year-over-year to just shy of $2 billion, while comparable sales soared 25% from the year-ago period. That comparable sales figure was driven by a 17% boost in store sales and 34% surge in digital sales, while overall revenue was up 27% on a three-year compound annual growth rate basis. Net income totaled $255 million for the third quarter.
For investors searching for a tried-and-true retail stock that is growing rapidly in a lucrative, expanding sector of retail, and is profitable to boot, Lululemon surpasses the mark on all counts.
