Mark Twain once said, "History doesn't repeat itself, but it often rhymes." The stock market regularly embodies that quote, and 2023 is shaping up to be a great example.
The Nasdaq-100 technology index plunged 33% last year, but data going back to its inception in 1985 suggests consecutive down years are rare. In fact, there has only been one occurrence, and that was during the dotcom tech bust from 2000 to 2002.
Every other losing year for the Nasdaq-100 has been followed by a strong bounce back. Since the index is up 34% in 2023 already, it's certainly rhyming with history. But investors who've missed out on this year's rally so far shouldn't fret -- here are two stocks that are still buys right now.
1. Uber: Ride-hailing is on the cusp of a major transformation
Uber Technologies (UBER -4.05%) is the world's leading ride-hailing (mobility) company but also has a strong presence in food delivery and commercial freight. While the latter two segments are strong performers for Uber with plenty of potential, the ride-hailing industry could be set for unprecedented value creation in the coming years.
Uber's drivers are its single largest expense. There are currently 5.7 million of them in the company's ecosystem who have completed 2.1 billion trips in the recent 2023 first quarter (ended March 31). While the company is delivering strong revenue growth, it hasn't yet reached profitability on a GAAP basis, partly due to its cost structure. But what if it no longer needed those human drivers?
The future of the ride-hailing industry will almost certainly be driverless. Electric-vehicle (EV) powerhouse Tesla could publicly release its fully autonomous software as soon as this year, and Uber is partnered with a mobility-technology company called Motional, which has already achieved Level 4 autonomy. In other words, its vehicles don't need any human input to drive or navigate successfully.
The partnership brings together Uber's 130 million monthly platform users, Hyundai's Ioniq 5 electric vehicle, and Aptiv's autonomous technology to potentially create the largest driverless ride-hailing network in the world. This is still a brand-new industry but could generate $4 trillion in revenue as soon as 2027, according to Cathie Wood's Ark Investment Management.
Therefore, while Uber stock has surged 56% so far in 2023, it's not too late for investors to buy. I think the company could reach a $1 trillion valuation in the future, which means its stock will have to soar 10-fold from where it trades today.
2. Redfin: If interest rates fall, real estate should strengthen
The real estate market has generally been one of the biggest casualties of rising interest rates. Annualized inflation hit a 40-year high in June 2022, and the U.S. Federal Reserve has since embarked on the most aggressive campaign to hike interest rates in its history as a result. Not only has it slowed the housing market, but investors have also soured on real estate technology stocks like Redfin (RDFN -0.19%).
Redfin decided to shut down its RedfinNow iBuying (direct-buying) segment in late 2022, where it previously bought homes from willing sellers and attempted to flip them for a profit. The slowing housing market placed its inventory of properties at risk of a steep decline in value. While it wasn't a profitable operation, iBuying made up about half of Redfin's revenue, so this has been a significant transition for the company.
It's now focusing on its most successful segment: brokering. Redfin employs 1,876 lead agents who cover 98% of the U.S. housing market. In the first quarter of 2023, they represented 0.78% of all houses sold across America. The company focuses on attracting sales volume, so it charges listing fees of 1% to 1.5%, which is far cheaper than the industry standard of 2.5%.
Nonetheless, with the absence of iBuying, Redfin's revenue crashed 45% year over year in Q1 -- yet its stock price has surged 146% in 2023 so far. Why? Because it's a much leaner and healthier business now, and management predicts it will generate positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year.
Analysts predict Redfin will deliver $1.1 billion in revenue for the full 2023 year. Since the company is valued at just $1.1 billion right now, this could be a great chance for investors to buy in at a rock-bottom price. If interest rates do come down later this year, as some strategists expect, the housing market could bounce back and send Redfin stock much higher from here.
