The stock market started 2021 strongly, but those initial gains evaporated in February. When fools love it when stocks fall, because it gives us a chance to buy our favorite deals at a discount.
What actions do we think are the best opportunities today? We asked five Motley Fool employees to rate and they shouted SL Green Realty (NYSE: SLG), Carparts.com (NASDAQ: PRTS), Etsy (NASDAQ: ETSY), Etsy (NASDAQ: ETSY), Uber (NYSE: UBER), and Airbnb (NASDAQ: ABNB).
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A hidden e-commerce winner
Jeremy Bowman (Carparts.com): 2020 was a great year for e-commerce actions thanks to the pandemic, and Carparts.com was among the big winners, with shares of almost 500%. Even with the economic reopening coming, however, 2021 seems to be another strong year for the auto parts retailer.
First, the opportunity is more than just an e-commerce game. The company is undergoing a turnaround that began in 2019, when a new management took over. Under CEO Lev Peker, Carparts.com discarded underperforming brands and consolidated the company’s operations, which previously included banners like JC Whitney and Auto Parts Warehouse, under the Carparts.com brand, making marketing and brand building very more efficient. He also changed the corporate name from US Auto Parts to Carparts.com. The recovery initiatives, which also include opening new distribution centers and updating its technology infrastructure, are showing results. Gross margin increased for six consecutive quarters, allowing the company to reinvest a larger percentage of revenue in the business, and e-commerce sales increased 105% in the third quarter.
A number of macro factors are also supporting the company. Auto parts sales are traditionally strong after recessions, as consumers postpone buying new cars, and the increase in used car sales during the pandemic is likely to favor auto parts sales, as well as the increase in vehicle miles when the economy reopens.
Carparts.com will report fourth quarter earnings on March 8. Currently, Wall Street sees only the company’s revenue growing 12% this year, which seems like a low estimate. If that is the case, the stock should have many advantages from here.
About to get a big shot in the arm
Matt DiLallo (SL Green Realty): The past year has been difficult for Manhattan’s largest office landlord, SL Green Realty. The pandemic affected New York City enormously, keeping tenants off their peak in Manhattan.
However, office buildings are about to receive an injection in the arm as vaccines are launched, allowing people to start occupying them again. While companies have moved quickly to remote work, most can hardly wait to return to their offices because they are vital to productivity, orientation and culture creation. That is why SL Green managed to collect 97.9% of the rent for the office billed last year and to sign more than 1.2 million square feet of new and refurbished office rentals, although most of the offices remained unoccupied.
Because of this eventual return, the value of high-quality office properties has remained relatively well. This allowed SL Green to take advantage of the market to sell several properties in the last year at excellent prices. These sales gave him money to support his balance sheet, pay a special dividend and buy back his defeated shares, which have fallen by more than 25% since the beginning of 2020. REIT was also able to increase its monthly dividend for the 10th consecutive year, pushing the yield above 5%.
SL Green’s shares could skyrocket like a Manhattan skyscraper this year, as companies get “all clean” to return to their offices. Add that to your generous revenue stream and this REIT looks like a winner.
An Amazon-proof e-commerce winner
Brian Feroldi (Etsy): When it comes to e-commerce, Amazon.com (NASDAQ: AMZN) tends to suck all the air out of the room. However, the shift from offline sales to online sales is so great that many companies are about to win.
Etsy has clearly established itself as one of those e-commerce winners. The company’s platform connects buyers and sellers of homemade products, a growing niche that isolates it from other e-commerce competitors.
Etsy’s 2020 numbers show that demand for the platform is growing. The company ended the year with 4.4 million active sellers (up 62%) and 81.9 million active buyers (up 77%). Total spending on the site more than doubled to $ 10.3 billion.
Etsy took full advantage of the increased demand. Revenue grew 111%, to $ 1.7 billion. The revenue growth was so strong that Ety’s net revenue grew 265%, to $ 349 million, although it significantly increased its spending on marketing, product development and hiring.
Management does not believe that hypergrowth will end anytime soon. Revenue is expected to grow at least 125% in the first quarter of 2020 and the margin is expected to remain strong in the near future.
All that kindness pushed Etsy’s stock to a well-deserved level ever. With the shares being traded at around 100 times the 2021 profit estimates, investors have to pay to buy the shares now. However, large companies tend to trade at a premium, and Etsy’s results prove that it is a large company. I think that superior performance is here to stay.
Take a tour of this stock
Adam Levy (Uber): Uber is well positioned to take advantage of the return to travel and the reopening of the economy. The company has the unique ability to leverage its bilateral network of drivers and customers in new (and old) opportunities across its range of services. Other companies with a single focus on the “giant economy” do not have this capability.
Uber’s most valuable assets are its local networks of drivers and customers. In the past two years, management has taken steps to exit markets where its network was not large enough to provide a competitive advantage. It also sold several non-essential assets. As a result, Uber enters 2021 as a more focused company with a stronger network advantage.
This advantage will be useful when people return to travel. Most notably, the delivery business should act as a favorable wind for the most profitable mobility business, as Uber makes it easier for customers and drivers to switch between services. The company has already seen the benefits, as management says the hitchhiking business has returned faster than other forms of transportation.
Despite the massive drop in mobility revenue last year, the segment remained profitable on an adjusted EBITDA basis. The reopening will cause growth in Eats to decrease, but improving acceptance rates and operational leverage should lead to positive EBITDA. As a result, management expects the company as a whole to produce positive EBITDA in 2021, as the delivery business improves profitability and mobility recovers.
Open the door to this travel stock
Chris Neiger (Airbnb): Some investors may refuse the idea of investing in the home sharing company while we are still in the middle of a pandemic, but there are two reasons that will not matter anytime soon. First, the pandemic will end and travel will Returns. Second, Airbnb is perfectly positioned to benefit when it does.
Travel certainly suffered a blow last year, and Airbnb’s revenue fell along with that. The company’s sales fell 22% in the fourth quarter. But you have to put this fall into context. Consider that the company’s fourth quarter revenue of $ 859 million exceeded the analysts’ consensus estimate of $ 748 million. And for the whole of 2020, revenue fell just 30% compared to 2019 – during a period when essentially the entire the world was not traveling.
With many parts of the U.S. opening up and coronavirus vaccines being distributed, Airbnb is optimistic that there will be “a significant travel recovery” this year.
And then there’s Airbnb’s position in the travel space. Airbnb is already a clear leader in the home sharing market and once again people are comfortable traveling again, there is no reason why bookings will not increase for the company. Airbnb offers unique experiences and rentals that cannot be found anywhere else and you can bet that people who have been confined at home last year are looking forward to both.
Maybe I’m biased towards Airbnb because I used the service to take a four-month trip with my family in 2019, but I’m not the only one who was impressed with the company’s business. Investors have increased the company’s shares by more than 40% since going public in December.
These investors are focusing on Airbnb’s $ 3.4 trillion total addressable market opportunity and understand that the company offers rental and experiences that its competitors cannot match. For investors looking for a unique company that is likely to see tremendous growth as travel recovers, Airbnb looks like a great choice.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even our own – helps all of us to think critically about investing and making decisions that help us become smarter, happier and richer.