There are all sorts of short-lived trends that make some companies money but turn out to be fads that aren't worth investors' hard-earned money, at least not those with a long-term mindset. Corporations that can deliver strong returns over the long run tend to be leaders in industries that won't decline in prominence or disappear anytime soon. That describes Fiverr (FVRR 1.93%) and Airbnb (ABNB 1.82%) well. Though these two stocks haven't been strong performers on the stock market this year, both could produce outsized results over five years or more.
NYSE: FVRR
Key Data Points
1. Fiverr
Fiverr is a platform that allows freelancers to advertise their services and attract businesses that want to hire them. Building a website from scratch is a long and complicated process, which makes Fiverr a better option for many freelancers. Businesses benefit from having a vast library of freelancers, with samples of their work and customer reviews, all in one convenient place.
Everyone wins, including Fiverr. The company's revenue hasn't been growing nearly as fast as it once did, but the tech leader has been able to turn a profit by cutting costs aggressively.
In the second quarter, Fiverr's revenue of $94.7 million was up by 6% year over year. It turned a net income per share of $0.01 in the second quarter of 2023 into one of $0.08 this time around.
Fiverr also announced the acquisition of AutoDS, a company that specializes in drop-shipping. The two entities did not disclose the financial details of the transaction. The move, though, helps Fiverr land a new source of recurring subscription revenue in a market that was worth $226 billion in 2022, according to some estimates.
It also grants the company another growth opportunity, as drop-shipping is on a growth path. Also, the company's core business will benefit from an important tailwind -- the growth of the gig economy. Workers enjoy the flexibility it offers. Others need an additional source of income on the side. Whatever the reason, analysts predict the gig economy will continue to expand.
Fiverr is also profiting from the increased adoption of artificial intelligence as businesses are turning to its platform to hire experts in the field. The company estimates a total addressable market of $247 billion -- that's without AutoDS's addition to its business.
Although Fiverr's shares are down significantly over the past three years, it remains an excellent stock to buy and hold for a while.
NASDAQ: ABNB
Key Data Points
2. Airbnb
Airbnb is a leading provider of accommodations and experiences for travelers. The company's platform features more than 5 million hosts in dozens of countries worldwide.
Though Airbnb's business was in the dumps during the pandemic, it has rebounded arguably stronger than ever. Revenue has been growing at a good clip, and Airbnb is consistently profitable.
In the first quarter, Airbnb's top line grew by 18% year over year to $2.1 billion. Its net income of $264 million was up 126% higher than the year-ago period -- it was the most profitable Q1 ever for the company. Other key metrics moved in the right direction, including nights and experiences booked and free cash flow.
What do Airbnb's long-term prospects look like? The company should perform well in the foreseeable future, at least as long as people still enjoy traveling.
Consider one of Airbnb's growth opportunities: long-term stays. Stays of three months or more were up 25% year over year for the company in the first quarter. This is partly due to the gig economy as many freelancers enjoy traveling while on the road.
For those on the road for three months or longer, it is often preferable to stay in a private residence as it offers perks, such as privacy and amenities that might be hard to come by in a hotel.
AI is another potential growth driver for Airbnb. The company is working to create an AI-powered concierge. In November, it acquired GAI company GamePlanner.AI for that purpose. If successful in its AI-related initiatives, Airbnb could decrease costs and improve its efficiency and margins over the long run.
It's also worth noting that Airbnb's business benefits from the network effect, as more hosts on its platform will attract more guests and vice versa. This powerful competitive edge should allow Airbnb to remain a leader in its field and deliver market-beating runs to patient investors.
