It's no secret that the market has been particularly turbulent for tech stocks over the last year. Even as a stream of favorable market days to kick off 2023 has seen many favorite tech names rebound in the past few months, there's no telling what the market may have in store for investors for the remainder of 2023.
One thing is certain, however. Wonderful businesses with clear paths to growth and multiple catalysts driving their businesses forward can not only survive but thrive with the passage of time, and share prices tend to follow these kinds of compelling growth stories. If you're looking to invest in tech companies that could pop with the next market rebound, here are three names to consider for your buy list right now.
1. Airbnb
Airbnb (ABNB 1.09%) remains a key figure in the multibillion-dollar vacation rental industry, a space on track to reach a valuation of $119 billion by the year 2030. However, it's becoming increasingly clear that while the vacation rental space looks to be a durable tailwind upon which Airbnb can capitalize for the long haul, there are other, broader tailwinds within the travel industry that portend equally if not more favorably for the company's long-term growth trajectory.
If anyone was concerned that the era of "revenge travel" is the leading factor behind Airbnb's continued growth, which largely outpaces that of the average travel stock, a cursory look at the company's financials should displace that idea. For example, take the company's revenue and gross booking value for the full-year 2022, which totaled $8.4 billion and $63.2 billion, respectively. While these figures represented notable increase of 40% and 35%, respectively, from 2021, revenue and gross booking value were up by eye-popping amounts of 75% and 67% compared to the full year 2019. And whereas Airbnb recorded a net loss of $674 million in 2019, 2022 represented the company's first full year of profitability, during which it raked in profits to the tune of $2 billion. No wonder that even as the stock is trading down by approximately 20% from its share price one year ago, it's skyrocketed by approximately 40% year to date.
Short-term travel patterns in cross-border and urban destinations, and the continued recovery Airbnb is witnessing in these particular kinds of trips, are a clearly key components here. However, there's more beneath the surface.
Long-term stays -- which are stays of 28 days or longer -- now represent more than one-fifth of all bookings that are completed on Airbnb. People aren't just traveling on Airbnb for short periods, more and more people are living in these dwellings for extended stretches of time. Airbnb is working on upgrades to its long-term stay category, and recently launched a new initiative called Airbnb-Friendly Apartments, which allows you to search for apartments that you can not only only live in, but rent out on Airbnb while away for periods of time.
While there may be a back-and-forth in the growth trajectories of Airbnb's short and long-term stay categories, it's clear that management is banking on both to drive the company forward and maintain its competitive advantage in the years ahead, against the backdrop of both durable travel patterns and the increased flexibility people have in where they live and work. Airbnb looks to have a long road still ahead of it, and for long-term investors, now could be a fortuitous time to scoop up shares or add to an existing position.
2. Shopify
Shopify (SHOP 0.14%) built its business around a sticky subscription model by which business owners with any level of experience or entrepreneurial acumen can access the tools and solutions they need to get a business off the ground and scale it over time. While the headwinds afflicting the broader e-commerce space clearly impacted Shopify to a certain extent, it still remains one of the top providers of e-commerce platform, software, and hardware solutions in the world, a position that makes it ideally positioned to benefit from the long-term trajectory of this space even as short-term growth looks uncertain in a challenging consumer spending landscape. While shares are still trading down 40% over the trailing 12 months, the stock rebounded by approximately 13% since the beginning of 2023.
Currently, Shopify's platform powers about 20% of all live e-commerce websites globally and one-quarter of live e-commerce websites in the U.S. alone. The company is continuously working to evolve the digital and physical products available to maximize the success and earning potential of its merchants, and that's paying off even as growth remains down from pandemic levels.
The company reported gross merchandise volume of $197 billion in full year 2022, a 12% increase from 2021. Meanwhile, revenue totaled $5.6 billion for the 12-month period, a 21% year-over-year hike that was driven by increases of 28% in merchant solutions revenue and 11% in subscription solutions revenue compared to the prior year.
Shopify's acquisition of Deliverr last year, a key addition to boost the capabilities of its existing fulfillment network, is already paying off, and it could so many times over in the years ahead. In the 2022 earnings call, President Harley Finkelstein said, "We're creating one unified network that enables data-driven inventory distribution and access to our logistics services." He added, "Compared to Q4 of 2021, we've seen a 40% increase in orders per merchant, while Deliverr has achieved over 50% growth in units fulfilled and more than doubled its services outside of fulfillment, services like freight, B2B, parcels and returns."
Given Shopify's continued growth of its market share, steady revenue generation -- which remains well above pre-pandemic levels -- and ever-expanding suite of solutions for merchants, this is a company that remains a compelling choice for the long-term buy-and-hold investor.
3. Etsy
Etsy (ETSY -0.22%) is another growth-oriented business that some investors seem to be on the fence about. The stock is trading up by about 4% since the beginning of the year, even as shares remain down by approximately 25% from 12 months ago. There's no denying that the current economic environment remains challenging for just about any business with exposure to the discretionary side of consumer spending, but Etsy's focus on unique, handmade, vintage, or otherwise specialty goods is paying off in the form of superior growth from pre-pandemic levels and steady revenue generation.
In the full year 2022, Etsy delivered total revenue of $2.6 billion, a jump of 10% from 2021. This was helped by a 10% increase in marketplace revenue and a 12% boost in services revenue from the prior-year window. Etsy also recorded a gross profit of $1.8 billion for the 12-month period, a hike of 9% year over year. Gross merchandise sales of $13.5 billion represented a slight deceleration from 2021, but were more than twice its gross merchandise sales in the full year 2019. While Etsy still recorded a net loss of $694 million for 2022, it's important to note that this was attributable to noncash impairment charges to write down the value of pandemic-era acquisitions rather than actual business losses.
Looking at Etsy's growth in the final quarter of 2022, it's clear that while heightened periods of accelerated growth during the pandemic have made for some unfavorable year-over-year, and even year-over-two-year comparisons, the company remains on a steady trajectory from pre-pandemic levels. I would argue that this is a much more clear-eyed way of viewing Etsy's growth, instead of a brief period in the company's history in which an unusually high number of consumers were trapped at home with little to do in their spare time except shop online.
Case in point: Etsy.com recorded gross merchandise sales of $3.7 billion in the fourth quarter of 2022, along with gross merchandise sales per active buyer of $132. These two metrics alone represented respective increases of 145% and 27% on a three-year basis.
The e-commerce stock closed out the year with 95 million active buyers on its platform, up more than 100% from three years ago. This is a company with plenty of growth story left for investors to benefit from, provided they're willing to hold on through the choppy market waters.
