Many top stocks are still sagging over the past year and are well below their 52-week highs. The shares of industry leaders Airbnb (ABNB 2.76%) and Disney (DIS -0.14%) are both down around 30% over the past year, sorely underperforming the S&P 500's 12% drop.
But both of these are dominating their respective fields and have massive potential. Which one is the better buy today?
Generating sales
Disney is the leader in media and entertainment, and this year is its centennial. It has $84 billion in trailing-12-month sales.
Airbnb has skyrocketed from its inception in 2007 to become one of the fastest-growing travel companies in the world, with $8.4 billion in trailing-12-month revenue.
Both Airbnb and Disney have strongly rebounded from pandemic declines, but they're each experiencing deceleration. As a young growth company, Airbnb's sales increases are far outpacing Disney's.
DIS revenue (TTM) data by YCharts. TTM = trailing 12 months.
Driving profits
Generating sales is the core of a solid business, but turning sales into profits gives it greater value and longevity. Disney enjoyed growing profits for decades, but it faced intense pressure since the pandemic began and parks closed, which has now pivoted to pressure from the Disney+ rollout.
Airbnb, on the other hand, has an asset-light business that feeds into profitability, and 2022 was its first full profitable year.
DIS net income (TTM) data by YCharts.
Consider that Disney's trailing-12-month net income is less than double Airbnb's, while its trailing-12-month sales are 10 times Airbnb's.
Management is working feverishly to curtail Disney+'s losses, which swelled 78% year over year to more than $1 billion in the 2023 first quarter (ended Dec. 31, 2022).
What's in store
Airbnb's growth has slowed, but it's still expecting sales growth of 16% to 21% in the 2023 first quarter. It has experienced tailwinds with the reopening of travel, but now that it's past that, its high-growth stage may be coming to a close.
Airbnb still has powerful growth opportunities as it gains more hosts and provides more innovative travel solutions that the traditional travel companies can't match. Management also alluded to "expanding beyond the core," referring to some surprise product launches coming soon that could create years of more growth opportunities.
Disney, even with its slower growth, is still the dominant force in entertainment with numerous money-making franchises to power sales and profits. Management is guiding for Disney+ to be profitable by the end of 2024, and it has tons of content in the works, much of which is based on its popular titles such as Frozen and Toy Story, to keep fans engaged. It's growth story is still dynamic.
Which stock is a better value?
Disney stock trades at a price-to-earnings ratio of about 52, and a price-to-sales ratio of 2. Airbnb stock trades at 42 times trailing-12-month earnings, but 9 times trailing-12-month sales. Neither of these companies look more compelling to me from a valuation standpoint, since there are many variables that are going into these multiples.
I own both Disney and Airbnb stock, and I recommend them both. But if I had to pick one over the other, Airbnb looks like the better buy right now. Its profits are soaring, and it's just getting started in accessing its huge market opportunities.
