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Motley Fool Issues Rare “All In” Buy Alert
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History shows that stocks perform better than any other asset class over time. While gold, oil, and housing may beat the market for short periods, over the past century equities handily trump all else.
That holds true with cryptocurrencies as well, which had stocks eating their dust the past few years with phenomenal gains as everyone began buying in. But in 2022, despite the S&P 500’s drop of more than 13% year-to-date, the Crypto 10 index of the top 10 cryptocurrencies is down over 57% so far this year. That just reinforces the notion that stocks remain your best bet over the long haul.
Because technology stocks were the engine driving the market higher during their nearly 15-year bull run, that sector’s collapse this year puts previously out-of-reach high flyers well within the grasp of investors today. The following three tech stocks hold far more potential today than any of the largest cryptocurrencies.
Image source: Getty Images.
Short-term vacation rental Airbnb (ABNB 0.50%) has an advantage over the hotel and motel industry in that it has little overhead or capital expenditure requirements that would saddle it with debt it would need to service. While it ended the second quarter with $1.9 billion in long-term liabilities, it also had $6 billion in cash and equivalents along with another $2.3 billion in investments readily available. It’s essentially a low-overhead, cash-rich business, and one that is growing fast.
Revenue soared 58% to $2.1 billion last quarter as gross bookings value and nights and experiences booked each rose 25% or more. It also turned a $21 million loss a year ago into a $373 million profit this year, while also generating $795 million in free cash flow.
Despite this, Airbnb’s stock languishes, having lost nearly half its value from its 52-week high. Fears of a recession brought on by rampant inflation, elevated energy prices, and rising interest rates continue to weigh on the stock’s performance. And that’s just in the U.S. Overseas, the economic situation is more dire, with war, skyrocketing energy prices, and the prospects for food shortages.
Airbnb’s business model is proving quite resilient nonetheless, and its depressed price represents a good opportunity to get in on a hospitality stock with excellent long-term potential.
Chipmaker Nvidia (NVDA -2.42%) was sliding long before the flip of Ethereum (CRYPTO: ETH) from a proof of work validation system to a proof of stake system where stakeholders validate transactions, but “the merge” is having an impact nonetheless.
That’s because Nvidia chips are currently often used to do the validation work, which is why its gaming chip business has long been so robust. Those gaming chips weren’t being used primarily for video games, but rather validating Ethereum transactions — and now with the change, they’re not going to be in such demand anymore.
Nvidia’s recent Q2 preliminary update shows the potential result; revenue is expected to be $6.7 billion instead of the previously expected $8.1 billion because gaming revenue of $2 billion will be down 33% from last year, and off 44% from the prior quarter.
Fortunately for investors, Nvidia’s data center business has surpassed gaming as its primary revenue maker, and sales there of $3.8 billion are expected to be 61% higher than the year-ago period (albeit up just 1% quarter-to-quarter).
There will likely be some pressure on Nvidia’s stock as a result of the gaming business decline, but the high-performance chip maker still has its finger on the pulse of all the important arenas for the future of GPUs. With shares down 50% from their highs and 44% year-to-date, it’s a great deal for this long-term winner.
E-commerce platform provider Shopify (SHOP 0.93%) has been absolutely crushed, losing more than 80% of its value as growth has slowed from the frenzied, early days of the pandemic.
Because Shopify’s core business is primarily establishing and optimizing online sales channels for small and medium-sized businesses, it’s now susceptible to the recessionary winds blowing since it’s a retail-driven company. Rising rates and inflation limit consumer spending and new business formation and expansion.
The problem is the market is assessing value based on those pandemic runs, and right now business is reverting to the mean of its pre-pandemic existence, which is just fine for an investor with a sufficient investing timeline. Such meteoric growth spurts are not sustainable, and admittedly Shopify made some mistakes of its own — but it’s course-correcting now, and will be better positioned for long-term growth.
It launched a merchant money management account, a small business loan boutique, a fully hosted enterprise e-commerce platform for fast-growing brands, and the Shopify Fulfillment Network, which brings the shipping logistics problem of merchants in-house. It also offers non-fungible tokens, or NFTs, to help businesses and brands better connect with customers.
With a balance sheet that remains in good shape and prospects for steady future growth, Shopify is a stock that should easily outpace any cryptocurrency in the years ahead.
Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb, Inc., Ethereum, Nvidia, and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.
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