Growth stocks are often attractive because they have the potential for big gains for patient investors. Investing $5,000 of your hard-earned money isn't a move to be taken lightly, and while there are lots of potential places to invest that sum, I think splitting the amount between two great companies -- Airbnb (ABNB 1.17%) and Microsoft (MSFT 0.37%) -- is a great bet. Here's why.
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1. Airbnb
Airbnb's business suffered during the height of the pandemic as traveling plunged, but it has come roaring back. The company's annual revenue hit a record in 2022, rising 40% to $8.4 billion, and Airbnb ended the year with 6.6 million global active listings, which was up more than 900,000 from the start of the year.
The online rental-listing company also put up impressive numbers in the fourth quarter, with sales of $1.9 billion beating analysts' average estimate of $1.86 billion, and earnings per share of $0.48 easily outpacing Wall Street's consensus estimate of $0.25.
And it's not just on a year-over-year comparison where Airbnb's business is shining. The number of gross nights booked for more than a week was 40% higher in the fourth quarter, compared to the same period in 2019.
While other companies went on a hiring spree during the pandemic, Airbnb was forced to cut back its growth. This has put it in the opposite position of the many companies that are cutting jobs today: Management said on the fourth-quarter earnings call that it will "continue hiring at a judicious pace in 2023."
So far, Airbnb has proved that it can weather difficult times and emerge stronger than before. The hard part of getting through a global pandemic (when travel was nonexistent) is over, and the company's latest quarter shows that Airbnb is now back in growth mode.
2. Microsoft
Microsoft might not be top of mind when it comes to thinking about growth stocks, but this tech giant has shown time and time again that innovation is still at the core of what it does and how it grows.
Take, for example, the company's latest investment in artificial intelligence (AI). Microsoft was an early investor in OpenAI, the maker of the ultra-popular ChatGPT. Since the advanced chatbot's debut just a few months ago, Microsoft has integrated it into its Bing search engine and is adding it across its popular enterprise apps, including Word, PowerPoint, Teams, and Outlook.
Microsoft's early bet on AI is still difficult to quantify, but there's no denying the company is tapping into one of the next big things in tech. Just two months after ChatGPT launched, it had more than 100 million monthly active users. And when Microsoft integrated the chatbot into Bing, the app was downloaded nearly as many times in just one week as it had been all of last year.
While the quick adoption rates are impressive, the more important idea here is that Microsoft's early moves are helping the company tap into the fast-growing AI-powered software market, which has an estimated market size of $500 billion this year.
And Microsoft has other irons in the fire besides AI. Its cloud computer service, Azure, has 23% of the cloud infrastructure market -- up from 15% in 2019 -- and it continues to grow. Sales from its Azure and other cloud services segment rose 31% in the most recent quarter.
Microsoft successfully transitioned from a software company to a cloud computing company and is now in the midst of a transition to an AI-powered cloud computing company. Its past success and early moves into AI indicate Microsoft has a good shot at becoming a top AI stock -- and investors who notice what the company is doing now might be glad they invested earlier rather than later.
Be patient with this growth trajectory
Both Airbnb and Microsoft have unique opportunities in their respective markets, but that doesn't mean their share prices are going to deliver overnight. The market is pretty volatile right now, and these stocks will likely experience some price swings as a result.
But don't let that scare you away from growth stocks. Buying and holding great companies for five years or more is still a great way to benefit from the stock market's long-term gains. All you need to do is establish a sound investment thesis and remain patient.
