The stock market will be crushed in 2022. The tech-heavy Nasdaq composite index is down 28% so far, even after the largely positive trading week of July 20-24.
As a result of this decline, the shares of some companies have fallen to very attractive levels. Apple (AAPL 2.45%†† coupang (CPNG 3.61%†and Airbnb (ABNB 8.14%† have all fallen to the point where stocks beg to be bought, and with these three stocks, investors should consider doing just that.
Apple may not excite many investors due to its $2.25 trillion market cap, especially given the saturation in the smartphone space. By some estimates, Apple’s smartphone market share will reach a whopping 51% in North America in the first quarter of 2022, leaving little room for growth.
However, Apple’s potential is not being exploited. The wearables division has the potential to increase the value of its watches to consumers, which could dramatically boost demand and revenue. One way Apple is doing this is by integrating health features into the Watch. The tech titan already has heart rate, blood oxygen, and fall detection monitors on its current watches, but it could offer non-invasive blood glucose and sleep tracking features in the future.
Given that Apple’s wearables division accounted for just 9% of total revenue in its fiscal second quarter, which ended March 26, 2022, there’s a lot of room for this segment to grow if these features can drive the value and demand for its wearables. improve.
That alone can be attractive, but you’re also buying one of the strongest companies in history. The company generated $102 billion in net revenue and $106 billion in free cash flow in the past 12 months. This staggering profitability has led to continued leadership in the smartphone and computer industries, while at the same time financing growth opportunities, and even leaving enough for a dividend and share buybacks.
At 22.5 times earnings, Apple is trading at its lowest valuation since early 2020. At this price, you may regret not buying this dominant behemoth.
Coupang is the leader in e-commerce in South Korea and with more than 18.1 million active customers in the first quarter, about 35% of the South Korean population uses Coupang. This has led to great success for the e-commerce business, generating more than $5.1 billion in revenue in the first quarter.
Shares, however, have fallen nearly 75% since Coupang’s IPO in early 2021, pushing the price-to-sale ratio to a steal of 1.1. This astonishing drop is likely because the company is struggling with profitability and cash flow. For example, in the first quarter, Coupang posted a loss of $209.3 million and free cash flow of $294 million. This is partly due to the low margins of first-party e-commerce sales. In the first quarter, the company’s gross margin was a meager 20%, but it is steadily improving.
However, this sale may have been exaggerated. Coupang has nearly $3.7 billion in cash on its balance sheet to fund these losses, and South Korea’s e-commerce space is still a big pond to fish into. Total e-commerce spending in the country is expected to reach $291 billion by 2025, leaving room for Coupang to thrive. At this multiple, the company could be a great investment if it can maintain its dominance as the space expands.
Like Coupang, Airbnb trades at an intriguing multiple of just 22 times free cash flow. Traditional hospitality stocks such as Marriott International and Hilton Worldwide trading relatively above 32 times free cash flow.
Given this cheap valuation, you’d expect Airbnb to be floundering, but its financial performance is almost all the time. In the first quarter of 2022, Airbnb reported a record 102 million booked nights and experiences, up 59% year over year. This bolstered the company’s cash flows: Over the same period, Airbnb generated $1.2 billion in free cash flow and lost just $19 million.
One possible culprit for stocks that have fallen more than 42% so far is fears of inflation and a potential recession that will affect travel in the second half of 2022. According to a report from the US Travel Association, 59% of Americans said gas prices affect their vacation plans, but travel spending surpassed 2019 levels for the first time since the pandemic began. So while demand could fall slightly if gas prices continue to rise, travel spending is likely to remain very high this summer.
As one of the leading platforms for booking unique stays for your vacation, Airbnb is likely to capitalize on this. It also has over 6 million active listings, so the chances of Airbnb’s running out of listings are slim too. With stock trading so low today and the company has such a great opportunity ahead of it – both short and long term – it’s worth buying stock for the long haul.