Many stocks received considerable ire from investors the last few years following pandemic highs, and in some cases, that volatility has been justified. However, it's also important to look beyond share price movements and evaluate the underlying businesses as a whole to determine whether a long-term investment thesis holds true.
Plenty of growth stocks are demonstrating strength from robust businesses that can drive durable returns for investors over the long run. Here are two such names to consider as you add to your basket of stocks this month.
1. Airbnb
Shares of Airbnb (ABNB 0.75%) have had a solid run up of more than 25% over the last year as a series of strong financial reports, bolstered by the ongoing travel resurgence, propelled the business forward. In fact, cross-border nights booked on Airbnb jumped 17% in the third quarter of 2023 compared to the prior-year period.
The quarter marked a significant increase in bookings in cities, with the cohort of guests booking high-density urban nights on Airbnb soaring 15% from one year ago. Active listings were also up 19% year over year, with the company adding about 1 million new active listings to its platform in the first nine months of 2023.
Short-term stays like business or leisure travel aren't the only trends driving this business forward. The growth of flexible and remote work sent an entirely new type of traveler to Airbnb's platform over the last few years, and the numbers bear that out.
Long-term stays, which are bookings of 28 days or more, comprise about one-fifth of all nights booked on Airbnb. Approximately 25% of long-term stays were booked for trips of three months or more in the third quarter of 2023. On the whole, in the third quarter of 2023, travelers booked 20% more trips lasting over three months on Airbnb than they did in the same period the prior year.
Airbnb continues to rake in cash and profits at an astonishing pace, and it's doing so with a business that remains largely asset-light because it doesn't own or operate stays on its platform. This looks like a business to buy and hold for the long term.
Even if the economy takes a dip in the coming months, consumers will still spend money on travel over the long run. That's a durable trend Airbnb can benefit from, even as it continues to derive growth from a wide variety of sources of travel spending.
2. Duolingo
Duolingo (DUOL 3.64%) is one of the most-used language learning apps on the market. This is no small feat, considering that language learning represents a global market opportunity that some estimates show could hit a valuation of about $337 billion by 2032.
Duolingo makes money in two primary ways: a free tier option that generates revenue from advertising, and paid subscriptions. In the third quarter of 2023, Duolingo reported that its business had 24.2 million daily active users. That figure was a 63% jump from a year ago.
Its monthly active user count was 83.1 million globally, up 47% from a year ago. However, paid subscriber penetration of that monthly active user base was just 8% at most recent count.
In short, even as the company has a growing base of language learners and faces a broad, expanding addressable market, its cohort of paid subscribers is just a fraction of its overall user count. This gives Duolingo tremendous room to grow not only from new language learners but also existing users that are already on the platform in the years ahead.
On that note, paid subscribers are growing at a substantial rate. Duolingo's paid subscriber base of 5.8 million users at the end of the third quarter of 2023 was a 60% increase from the end of the third quarter of 2022.
Duolingo is growing revenue at a solid rate, and is profitable. Its top line for the third quarter of 2023 totaled $138 million, a 43% hike from one year ago. The company also pulled in net income of $2.8 million for the three-month period, compared to a net loss of $18 million in the year-ago quarter.
Investors seem to be interested in the stock, having given shares a run-up of about 100% in the trailing 12 months alone. Given the prospects and growth of this business, it might be a good time to snag a slice of the action.
