Wall Street, and Main Street, are buzzing as investors enter what could be another bull market, and innovations like artificial intelligence (AI) are seen as providing significant boosts to many tech companies. And several stocks have skyrocketed, like Nvidia (NASDAQ: NVDA), up 190% this year.

Let's be frank; it's tough to beat the market by buying the most popular stock surrounded by hype.

But what about tremendous companies left on the back burner? Let's look at two compelling options.

1. Airbnb: When growth meets profitability

Airbnb (ABNB -1.57%) was once a darling of the market, and the price got quite a bit ahead of itself after its debut in late 2020. Then the pandemic persisted and changed everything. The company downsized, investors fled, and Airbnb became incredibly profitable. When the company's revenue tanked 30% year over year (YOY) in 2020, management made tough choices that are paying off big today.

They created a slimmer workforce with the top people laser-focused on the core issues. CEO Brian Chesky credited this as a big part of the company's 2022 success during the fourth-quarter earnings call, and CFO Dave Stephenson pointed out that the headcount was still lower than in 2019.

Revenue increased 75% over 2019, while total operating expenses increased 24%. Soaring sales and modestly rising costs brought the company its first generally accepted accounting principles (GAAP) profitable year in 2022, with $1.9 billion net profit on a 23% margin and tremendous free cash flow, $3.4 billion on a 40% margin. The across-the-board improvement is depicted below.

ABNB Free Cash Flow (Annual) Chart.

ABNB Free Cash Flow (Annual) data by YCharts.

This continued in the first quarter of 2023. Airbnb posted its first profitable Q1 ever, and sales rose 20% YOY. 

There are challenges the company must contend with. Some localities attempt to rein in short-term rental properties, limiting their availability through ordinances. For instance, Airbnb and New York City are involved in litigation over the city's attempts to limit the number of people who can host. This will always be a challenge for Airbnb, so the stock is not without some risk.

Global travel and tourism sales are expected to finally exceed pre-pandemic figures this year and continue growing. This means Airbnb had its best year in 2022 when overall travel was still below the 2019 level. As travel grows, so should Airbnb. The stock currently trades 41% off its 2021 high, which could open an opportunity for investors to accumulate shares while the market is focused elsewhere. 

2. Red Rock Resorts: Going local

What would you say if I asked what the second-largest gaming market is behind the Las Vegas Strip? Atlantic City would be an excellent guess -- but not correct. The second-largest market in the country is actually the Las Vegas Locals market, as shown below. 

Top 10 U.S. gaming markets.

Image source: Red Rock Resorts.

Not only is the market the largest in the nation outside of the Strip, but Las Vegas is one of the country's fastest-growing areas, especially among retirees. Nevada's lower cost of living and zero state income tax are massive draws, with many people relocating from high-cost areas like California. This market gives Red Rock Resorts (RRR 0.46%), which serves the Las Vegas Locals market, the house advantage. 

Red Rock Resorts and its subsidiary, Station Casinos, own 16 gaming and resort properties throughout the Las Vegas Valley and have nearly 6 million loyalty members. Unlike places on the Strip that serve tourists, Red Rock thrives on loyal, local customers who visit several times each month. This makes the demographics a launching pad for growth.

Revenue came in at $1.7 billion in 2022, just a slight increase over 2021. But remember, 2021 was buoyed by one-time stimulus payments. The company generated $561 million in operating income last year, a 39% increase over 2021. Red Rock returned to revenue growth mode in Q1 with 8% YOY, hitting $434 million in the quarter.  

Red Rock has an ace up its sleeve with its current Durango Casino Project (named for the road on which it sits), expected to open later this year. This resort features everything one expects at a typical high-end Las Vegas resort, including gaming, restaurants, guest rooms, and meeting spaces. It is located in the city's fast-growing and underserved southwest area and will add considerably to revenue, although we don't know how much yet. This is just one of several desirable parcels that Red Rock owns and plans to develop.  

Red Rock is a profitable company with loads of potential, but it isn't going to make anyone rich overnight. It will provide a dividend while investors monitor the fruits of current and new developments. The dividend was cut during the worst of the pandemic but yields over 2% currently, with a $0.25 quarterly payment per share. The company is also known to pay special dividends, such as the $3- and $1-per-share payments made in 2021 and 2022, respectively.

The stock's price-to-earnings ratio of 14 is higher than its closest competitor Boy Gaming, at 11; however, the premium is justified by Red Rock's pipeline and superior margins, shown below.

RRR EBITDA Margin (TTM) Chart.

RRR EBITDA Margin (TTM) data by YCharts.

Not many investors know of Red Rock Resorts; those that do have enjoyed a 50% total return over the last year. The secular demographic tailwinds, dividends, and vision are great reasons to consider investing in this stock.