The market has already delivered its fair share of great and not-so-great days in 2023, but wonderful businesses are still showing investors that they have what it takes to win over the long run. It's important to remember that the share price of any given stock reflects how the market values it in a given moment. Share price can tell you a lot, but it doesn't tell you everything.
Looking beyond share price at the underlying business and its core financials is how you discern whether you're looking at a great company with a clear path to growth ahead. If you're seeking two quality businesses that continue to deliver growth and profitability even in the current economy, you don't have to search far.
Here are two household names that may be too good to pass up right now.
1. Airbnb
Airbnb (ABNB 0.10%) has made a name for itself in the highly competitive yet fragmented travel industry, an effort that was by no means guaranteed success. However, in the roughly 15 years since Airbnb was founded as a small bed and breakfast in a living room in San Francisco, the company has evolved to such a scale that its platform captures roughly 20% of the entire vacation rental industry globally.
Of course, Airbnbs today are used for far more than just short-term trips or leisure travel. People are staying in Airbnbs for longer periods and even living in these accommodations in some cases. As of the first quarter of 2023, guest reservations generated more than $20 billion in gross booking value. Almost half of all gross bookings were for stays of at least seven nights, while 18% of stays were long-term stays of 28 days or longer.
That long-term stay figure was a slight deceleration from prior quarters, which was something management had predicted given the overall recovery in short-term stays now that borders have reopened after pandemic lockdowns. CEO Brian Chesky added some context to these developments in the company's first quarter earnings call:
I do think there is some -- little bit of a post-pandemic equilibrium that you're starting to see, and we're also seeing a mix shift because cross-border urban nights are now up. That being said, I remain extremely bullish on long-term stays. I think this is going to be one of the big growth opportunities for Airbnb over the next five years. And the reason why is because people are permanently more flexible.
Chesky also noted that one of the most prominent comments from users on the platform was about the cost of the long-term stays. The company has made more than a dozen upgrades to this travel segment in response, such as an automatic fee reduction for long-term bookings of more than three months. Guests can use buy now, pay later service Klarna when making reservations to reduce the upfront cost of a wide range of stay types. Airbnb also just launched an initiative called Airbnb Rooms, offering a new cost-effective category of accommodations where more than 80% of stays are less than $100 per night.
Travel patterns have changed from the pre-pandemic era. Airbnb is continuing to demonstrate that it can efficiently (and profitably) adapt its business to cater to the changing needs of all kinds of travelers. Its cost-effective business structure remains remarkably asset-light because it connects travelers with hosts without needing to own or manage the actual properties. Investors might want to consider even a modest position in this resilient business.
2. Apple
Apple (AAPL 0.52%) is hardly a new name to readers, but sometimes it's those tried-and-true businesses that investors will keep coming back to again and again. The tech behemoth, like other companies in its industry, is facing a challenging time as consumer spending patterns shift from goods to experiences and fears of a recession are still a potent reality.
Although Apple's business covers a wide range of products and services, it still generates the lion's share of sales from its iPhones. Still, in the company's second quarter of its fiscal 2023, ended April 1, the company set a new record for iPhone sales, even as the difficulties of the current operating environment pushed overall net sales down slightly from one year ago.
Another segment that continues to account for more and more of Apple's top line is its non-hardware services business. This includes subscriptions such as Apple Music and Apple TV+. It also covers products like Apple Pay, Apple Card, and even its newer buy now, pay later service.
In the quarter, Apple brought in total net sales of $95 billion and net income of $24 billion. Of that total, $51 billion came from iPhone sales and $21 billion from its services business. Considering that Apple's services business is its most asset-light segment (its cost of sales was a mere $6 billion in the quarter compared to the $47 billion incurred from the products businesses), shareholders should watch the consistent headway this segment is making as the company's second-largest driver of sales.
Apple is also making progress with its much-awaited Vision Pro mixed-reality headset, which just debuted at the Worldwide Developers Conference and is expected to be released next year. The headset is expected to cost $3,499 a unit. It's likely to span a range of personal as well as professional use cases, integrating with other Apple products as well as a range of third-party apps.
Apple just boosted its dividend by 4%, its 11th consecutive year of increasing its payout. It also returned a whopping $23 billion and some change to shareholders in the form of dividends in the March quarter. Even though the stock's dividend yield is less than 1% at the time of this writing, Apple's low payout ratio and consistent payout increases have made it popular with many income investors. Apple continues to demonstrate its relevancy and staying power with consumers amid the new waves of the digital age. For long-term shareholders, this is a business you can buy and hold on to forever.
