The stock market has been painful in 2022. The S&P500 (SNP INDEX: ^GSPC) The stock index has fallen 18% year-to-date, and many high-quality companies have seen even steeper declines. That doesn’t mean you should quit stocks right now, though. In fact, now seems like a great time to buy some fantastic stocks at a great price.
Let’s take the case of netflix (NASDAQ:NFLX) in 2011, for example. The DVD-by-mail pioneer was riding high that summer, reaching an all-time high (at the time) of 43.54% on July 13 after a 52-week rise of 147%. But the company was on the verge of a spectacular sale. Netflix expanded its digital video streaming service to a few Latin American countries that month, then split DVD shippers and streaming services into two separate consumer services. In hindsight, this separation was a wise and revolutionary decision. At the time, investors focused on the higher subscription prices that followed. Shares of Netflix fell 79.5% in those four months, now remembered as the Qwikster debacle.
What if you saw through the short-sighted panic and bought Netflix stock in the fall of 2011 when everyone else was selling the stock? For example, I doubled my Netflix investment on October 30, about a month before the annual low on November 30. So I missed the ideal buy date and some lucky investors enjoyed a 33% higher return thanks to this event. I’m not complaining, though. Every $5,000 investment since November 30, 2011 is now worth $122,500, outpacing the returns of the S&P 500 over the same period:
If you had bought Netflix on July 13 instead, you would still have doubled the returns of the S&P 500 with a return on investment of 4230%. It’s still not too shabby! However, I’m very glad I had the courage of conviction to buy Netflix stock when Wall Street threw it out with the bathwater.
On that note, high-growth phenomena Airbnb (NASDAQ: ABNB) and coupang (NYSE: CPNG) took a beating in 2022, but they could be on the verge of delivering Netflix-like returns in the long run. Read on to see why you want to consider them for your next $5,000 investment.
Accommodation market operator Airbnb offers travelers a different toolkit for planning vacations and business trips. Renting a living space directly from landlords in the area is a different experience. Renters can save money while hosts make money for spaces they often don’t use anyway. And the Airbnb portal also offers travelers alternative suggestions based on previous experiences and favorites saved to their account. This intuitive cross-promotion platform has become an important business advantage for Airbnb.
Business is booming. Airbnb’s revenue was up 58% year-over-year in the second quarter, or 64% excluding foreign currency headwinds. The company is booking more stays than ever, collecting higher fees per stay. Quarterly results tend to meet or beat Wall Street consensus estimates, including a 27% surprise in the second quarter.
Yet Airbnb shares have fallen 32% in 2022 and are trading at some of the lowest valuation ratios in the company’s history. Investors bundled this strong performing business with less attractive stocks in the travel sector. The company is disrupting the global hospitality market, an industry already worth more than $1 trillion in annual sales. The three co-founders still lead the company as CEO, President and Chief Strategy Officer. This stock is poised for a massive rebound as Airbnb continues to disrupt the travel industry over the next decade.
South Korean e-commerce giant Coupang may be a less familiar name, but its long-term business prospects are just as exciting as Airbnb’s.
First of all, you shouldn’t worry about Coupang’s international profile. South Korea is a modern nation with an advanced economy, home to many renowned companies and a robust economy. In addition, Coupang shares are listed directly on the New York Stock Exchange, subjecting the company to the same financial reporting rules and regulations as any all-American company. Therefore, you should expect high quality accounting and reporting here, which is not always the case for foreign stocks which are only available to US investors via pink sheets or OTC tickers. at will.
With that procedural concern aside, let’s talk about what Coupang does for a living. The company offers a variety of e-commerce solutions throughout Southeast Asia, with the majority of business serving South Korea and a single warehouse operating on US soil. Even the US branch is clearly targeting Korean customers, as the shopping platform is only available in Korean.
Besides the focus on the Korean market, Coupang reminds me Amazon.co.uk In many ways. The company sells products and services directly to consumers, with an in-house shipping and delivery system and a digital video streaming platform. The company leans a bit more into food delivery than its US model, and the Coupang Eats delivery service is a central part of the overall business. Food delivery has slowed in recent quarters due to looser COVID regulations in South Korea, but the operation is becoming more efficient and profitable even as core revenues decline.
The company is not yet profitable as it reinvests most of its gross profit into additional sales and marketing programs, expanded free shipping options, and other growth-enhancing ideas. But currency-adjusted sales soared 27% in the recently released second quarter, driving gross profits up 75% and net losses down 44%. Coupang is a classic high-octane growth stock, which exposed it to negative market forces in the first half of 2022.
The stock has fallen 42% this year and is currently trading at a modest 1.5 times trailing sales. 18 months ago, this valuation ratio stood at nearly 7 times sales. Coupang has found a huge target market and is carving out a lucrative slice of that space. Like Airbnb, it looks like a solid long-term winner and a worthy candidate for your next $5,000 investment.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Anders Bylund holds positions at Amazon and Netflix. The Motley Fool holds positions and recommends Airbnb, Amazon, Coupang and Netflix. The Motley Fool recommends Intercontinental Exchange. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.