In the wake of the market sell-off in 2022, many companies have reached valuations that interest me. However, these are not stocks I want to buy to make a quick buck. Instead, these are companies that I would love to be a long-term shareholder of.
Three stocks that would be great places to put money to work are Airbnb (NASDAQ: ABNB), Veeva systems (NYSE: VEEV)and PubMatic (NASDAQ: PUBM). Their valuations have hit multi-year lows, providing investors with a great entry point right now.
Travel has changed forever with the Airbnb revolution. Instead of staying in hotels, consumers can now choose to stay in properties owned by Airbnb’s millions of hosts. Booking this type of stay allows many consumers to travel at a lower cost than a traditional hotel or to have a more unique travel experience.
Although the company faced pandemic-related headwinds in 2020 and 2021, the company emerged stronger in 2022. In the second quarter, Airbnb nights and experiences booked increased 24% over the same quarter of 2019, while revenues increased by 73% compared to the same quarter. period. Revenue was also up 58% year-over-year, with the company posting its highest profit ever at $379 million, with a net margin of 18%.
The third quarter looks just as good, with management expecting bookings to grow at a similar pace to last quarter. And the revenue forecast of $2.78 billion to $2.88 billion indicates it could be the biggest quarter in company history.
Right now, Airbnb shares are trading at around 9.1 times sales, which isn’t cheap, but with an uptrend, the shares are trading at a more reasonable 34 .5 times future earnings estimates. This bonus is deserved given the company’s strong growth and rising profitability.
If the economy weakens, investors will have to see how that affects Airbnb’s business. Unfortunately, as a relatively young company, there is no precedent for how Airbnb might fare in a non-COVID recession, so this could be new waters for investors and the direction.
Yet Airbnb has become synonymous with travel, and with its expansion into new areas like experiences, this company still has a long way to go.
The life sciences industry has unique requirements that others do not. Above all, patient confidentiality is essential. Second, data should be retained for patient records and reports of medical study results. Veeva Systems specializes in serving this unique industry with its Vault (records retention) and CRM (customer relationship management) products. By storing all of this data in the cloud, the company eliminates the burdens of paperwork that plagued the medical industry and enables easier access to data.
Veeva’s business is in a transition phase. It’s no longer a fast-growing company; instead, it is growing steadily while trying to stabilize its profitability. In its second fiscal quarter (which ended July 31), revenue rose 17% year over year, while net income fell 17%. Its margins have shrunk across the board, continuing a trend investors need to watch.
Trading at 13.2 times sales, Veeva is also expensive, but the last time its valuation was this low was in 2018. Its forward price-to-earnings (P/E) ratio of 34.2 is close from the lowest since 2015, reinforcing the idea of its relative value.
Veeva is still working to stabilize its profitability, but its stock could still take off in the long term thanks to its high margin potential.
In tough economic times, ad agencies are known to struggle. Shrinking advertising budgets are an easy way for businesses to save on spend, and industry-related stocks are often affected. That’s exactly what happened with PubMatic, but it didn’t struggle as badly as other advertising-focused companies.
Because PubMatic is in the ad-tech space, it’s more insulated from economic headwinds. PubMatic works on the sell side of ad transactions, helping businesses with ad space (like websites and streaming services) open their inventory to potential buyers.
PubMatic had a strong second quarter with revenue growing 27% year-over-year to $63.0 million, while producing net income of $7.8 million (margin of 12, 4%). Analysts expect PubMatic sales to grow another 19% in 2023.
Given its solid growth and profitability, you might expect the stock to also trade at a premium, but you’d be wrong: PubMatic trades for just 14.4 times forward earnings. This is a discount for the S&P500a P/E of 17.5.
The average index company is unlikely to grow faster than PubMatic, so its stock is a bargain at this price. The platform is also at the beginning of its life cycle while remaining strong against the headwinds of the advertising industry.
This trio of stocks would be a great choice to deploy any cash you may have on the sidelines. However, the market could still fall from here as easily as it could rebound. With this in mind, it would be wise to deploy cash slowly and at set time intervals to avoid letting emotion creep into your investment decisions. The most important thing is to keep buying.
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Keithen Drury holds positions at Airbnb, Inc., PubMatic, Inc. and Veeva Systems. The Motley Fool holds posts and endorses Airbnb, Inc., PubMatic, Inc., and Veeva Systems. 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.