2 Stocks Down 32%, You Can Buy Now

The market downturn in 2022 has turned into a sustained tailwind. that much S&P 500 The index is up 20% over the past year, turning fears of a yet-to-arrive recession into an official bull market.

But not all long-term winners have gotten the bullish note yet, so smart investors should keep an eye out for potentially undervalued growth stocks. Right now, Fiverr International (FVRR -5.57%) and Airbnb (ABNB -3.29%) These stand out as two of the best investment ideas in Wall Street’s bargain bin.

Fiverr: A hidden gem in the crown of the gig economy

Anders Weiland (Fiverr International): In the rapidly evolving gig economy, Fiverr International stands out not only for its resilience, but also its incredible potential for long-term growth. Fiverr’s strategic position and innovative approach amid the busy freelance platform market has paved the way for sustainable expansion, but it also boasts a valuation that may raise eyebrows for its modesty.

Fiverr’s revenue has grown 86% over the past three years. During the same period, free cash flow increased fivefold. But market makers on Wall Street ignored this healthy business trend. Instead, Fiverr’s recent stock action was inspired by negative earnings and a deep misconception that the end of the COVID-19 pandemic would spell the end of the company’s growth.

Fiverr’s long-term shareholders thus suffered a 90% loss in three years. These days, the stock is changing hands at a modest valuation of 3.4x sales, 19x free cash flow, and 14x future earnings estimates. Yes, Wall Street experts who had dismissed Fiverr’s cash-based success in recent years have changed their stance with downright optimistic revenue estimates for 2024.

Now the time has come. I am inspired by the company’s relentless pursuit of innovation. From the launch of Fiverr Enterprise, designed to streamline corporate freelancing, to the introduction of AI-powered tools like the Fiverr Neo chatbot, the platform is constantly being upgraded to meet the dynamic needs of its global user base. These developments not only improve the user experience for both buyers and providers of freelance services, but also expand the market reach. Like any typical high-tech growth legend, Fiverr is laying the foundation for future revenue streams through a rich layer of research and development.

Fiverr’s modest valuation, solid growth prospects, and strategic innovation make it a compelling case for growth investors. In a changing world where flexibility and digital solutions are becoming increasingly important, our blueprint for growth seems tailor-made for the opportunities ahead. This crown jewel of the gig economy is shining brightly, even if mass market investors have yet to notice. For those interested, Fiverr offers a golden opportunity to invest in the flexible future of work.

Airbnb stock still has tremendous long-term potential.

Keith Noonan (Airbnb): The broader market may not like the stock right now, but Airbnb has continued to grow revenue at double-digit rates and record impressive margins. Fourth quarter revenue increased 17% year-over-year to $2.2 billion. These achievements boosted the company’s annual revenue to $9.9 billion, an 18% increase over 2022. Meanwhile, the company ended the year with free cash flow of $3.8 billion, or 39% of total sales for the period.

Despite strong business performance, Airbnb’s stock price actually fell shortly after reporting fourth-quarter results. The travel company’s stock price is still down about 32% from its peak.

With a market cap of about $95 billion, the company is valued at about 25 times its free cash flow. It’s still a growth-driven valuation, but I think it will look cheaper over time.

The rental leader currently has more than 5 million property hosts on its platform and 7.7 million property listings globally, but there is still plenty of room for expansion in the long term. Airbnb is making moves to boost adoption in countries where the business is still in its infancy. Executives also said the company is preparing to expand into new service categories.

It wouldn’t be surprising if companies began offering flight bookings, car rentals, or other travel-related services through their platforms. If so, Airbnb could offer discounted bundled prices to greatly appeal to users.

Crucially, Airbnb has fantastic brand power, best-in-class technical resources, and a large global user base. This foundation will help the company expand into new business areas. The business also has a very strong balance sheet, with zero debt and $10.1 billion in cash and equivalents at the end of last year.

Airbnb’s business is performing better and has greater opportunities than its stock price reflects, and investors can take advantage of this disconnect.