Many investors are eager to put 2022 in the rear view mirror. Last year, the prices of many stocks plummeted, as the negative impact of inflation, and the Federal Reserve’s measures to control it, hit financial markets hard.
However, investors would be wise to remember that the stock market has rebounded from all of its previous stumbles, and it will most likely only be a matter of time before the next bull market sets in.
With that said, walt disney (DIS 1.81%), airbnb(ABNB -0.88%)Y Apple (AAPL) -4.17%) are three strong companies whose share prices are currently near their lows of last year. Buying their shares now can position you to benefit handsomely from a market rally.
The media industry is in a state of shock. The cord-cutting trend is eating into profits for cable TV and streaming providers, while movie theater chains have yet to recover from the lingering effects of COVID-19. At the same time, streaming services are struggling with increasingly intense competition, making it harder to turn a profit.
Disney has found itself squarely in the middle of these challenging trends, but the entertainment titan is positioned to weather this storm better than its rivals. After all, Disney already has more streaming subscribers than Netflix, with more than 235 million customers on its popular Disney +, Hulu and ESPN + offers. Meanwhile, Disney’s diversified collection of theme parks, product licenses and legacy media businesses continue to post plentiful profits.
Disney’s streaming operations are not yet profitable. However, the company has increased its spending to produce more content to attract more customers. It’s a solid strategy, one that has helped fuel Disney’s impressive subscriber growth.
but recent price hikes and a new ad-supported plan are indications of management’s changing focus on profitability. Disney+ is projected to generate sustained earnings beginning in 2024, an achievement that would likely fuel a powerful rally in Disney’s stock price.
With Disney stock falling nearly 43% over the past year and trading near its 52-week lows in the mid-$80s, you now have the opportunity to buy shares of the media giant at a deeply discounted price before of these potential gains.
Fears of a possible recession and a corresponding downturn in the travel industry contributed to a 49% drop in Airbnb’s share price in 2022. However, the home rental market has held up relatively well, buoyed by the trend of remote work and the demand for lost vacations during the early stages of the pandemic. Therefore, investors appear to be underestimating Airbnb’s prospects.
More than 4 million hosts list their properties on the Airbnb platform. This extraordinary scale, combined with Airbnb’s brand recognition and leading consumer mindset, gives it powerful advantages over its competitors.
Also, listing houses for rent has become a way for people to earn extra money in tough economic environments. Single room listings increased 31% year-over-year in the third quarter, due in part to this trend. In total, Airbnb’s revenue rose 29% to $2.9bn, while its net income soared 46% to $1.2bn.
However, it is Airbnb’s cash flow generation that is perhaps most notable. Since the hosts incur the costs of purchasing and preparing properties for rental, the company does not have much capital expenditure. In turn, he turned a third of his income into Free cash flow in the third quarter, a hefty sum of $960 million.
Despite this impressive growth, profitability, and cash flow generation, Airbnb shares are trading near their 52-week lows, around $85. With a market capitalization of about $54 billion, Airbnb shares can be bought for about 16 times its $3.3 billion in free cash flow from the past 12 months. That is a bargain price for such a high quality business.
COVID-related disruptions are entangling Apple’s supply chains in China. Panicked investors rushed to sell the tech titan’s shares, which have fallen nearly 30% over the past year.
Fortunately, CEO Tim Cook is a logistics expert and exactly the right person to troubleshoot the company’s supply chain. Apple has already started moving some of its manufacturing sites to places like India and the US to better diversify its operations.
Better yet, Apple’s highly profitable services are becoming a bigger part of its business. Offers like Apple Music and Apple TV+ are attracting subscribers at a solid rate. And the rising tech giant advertising the business will grow much more in the coming years.
This strong growth in services is helping fuel Apple’s unrivaled cash flow and earnings production, to the tune of $95 billion in net revenue and $111 billion in free cash flow over the past 12 months.
Best of all, these gains can be had at an attractive price. With its shares still trading near their 52-week lows, around $125, you can buy Apple stock at a deep discount today.
Dark Joe has positions at Walt Disney. The Motley Fool has listings and recommends Airbnb, Apple, Netflix, and Walt Disney. The Motley Fool recommends the following options: $145 long calls in January 2024 at Walt Disney, $120 long calls in March 2023 at Apple, $155 short calls in January 2024 at Walt Disney, and $130 short calls in March 2024. 2023 at Apple. The Motley Fool has a disclosure policy.