The inventory market began 2021 with a bang, however these early positive aspects evaporated in February. When Fools find it irresistible when shares decline, as a result of it offers us an opportunity to purchase our favourite companies at discounted costs.
What shares do we expect are high alternatives right this moment? We requested 5 Motley Idiot contributors to weigh in, and so they referred to as out SL Inexperienced Realty (NYSE:SLG), Carparts.com (NASDAQ:PRTS), Etsy (NASDAQ:ETSY), Etsy (NASDAQ:ETSY), Uber (NYSE:UBER), and Airbnb (NASDAQ:ABNB).
A hidden e-commerce winner
Jeremy Bowman (Carparts.com): 2020 was an incredible 12 months for e-commerce shares due to the pandemic, and Carparts.com was among the many large winners, with shares up practically 500%. Even with the financial reopening arising, nevertheless, 2021 appears to be like set to be one other sturdy 12 months for the auto components retailer.
First, the chance is extra than simply an e-commerce play. The corporate’s within the midst of a turnaround that started in 2019 when new administration took over. Underneath CEO Lev Peker, Carparts.com has jettisoned underperforming manufacturers and consolidated the corporate’s operations, which had beforehand included banners like JC Whitney and Auto Elements Warehouse, beneath the Carparts.com model, making advertising and brand-building rather more environment friendly. It additionally modified the company identify from U.S. Auto Elements to Carparts.com. The turnaround initiatives, which additionally embrace opening new distribution facilities and upgrading its tech infrastructure, are delivering outcomes. Gross margin has elevated for six quarters in a row now, permitting the corporate to reinvest a larger share of income again within the enterprise, and e-commerce gross sales jumped 105% within the third quarter.
Quite a few macro components are supporting the corporate as properly. Auto components gross sales are historically sturdy popping out of recessions as customers delay shopping for new automobiles, and the spike in used automobile gross sales in the course of the pandemic ought to favor auto components gross sales as will the rise in car miles as soon as the economic system reopens.
Carparts.com will report fourth-quarter earnings on March 8. At the moment, Wall Road solely sees the corporate’s income rising 12% this 12 months, which appears to be like like a lowball estimate. If that is the case, the inventory ought to have quite a lot of upside from right here.
About to get a giant shot within the arm
Matt DiLallo (SL Inexperienced Realty): Final 12 months was a tricky one for Manhattan’s largest workplace landlord, SL Inexperienced Realty. The pandemic significantly affected New York Metropolis, preserving workplace tenants out of their Manhattan skyrises.
Nonetheless, workplace buildings are about to get a shot within the arm as vaccines roll out, permitting folks to begin occupying them once more. Whereas firms rapidly pivoted to distant work, most cannot wait to return to their workplaces as a result of they’re important for productiveness, mentoring, and creating tradition. That is why SL Inexperienced was in a position to acquire 97.9% of the workplace hire it billed final 12 months and signal greater than 1.2 million sq. ft of latest and renewal workplace leases despite the fact that most workplaces remained unoccupied.
Due to that eventual return, the worth of high-quality workplace properties has held up comparatively properly. That allowed SL Inexperienced to benefit from the market to promote a number of properties over the previous 12 months at wonderful values. These gross sales gave it the money to shore up its stability sheet, pay a particular dividend, and purchase again its beaten-down inventory, which tumbled by greater than 25% for the reason that begin of 2020. The REIT was additionally in a position to enhance its month-to-month dividend for the tenth straight 12 months, pushing the yield above 5%.
Shares of SL Inexperienced might soar like a Manhattan skyscraper this 12 months as firms get the “all clear” to return to their workplaces. Add that to its beneficiant earnings stream, and this REIT appears to be like like a winner.
An Amazon-proof e-commerce winner
Brian Feroldi (Etsy): In the case of e-commerce, Amazon.com (NASDAQ:AMZN) tends to suck all of the air out of the room. Nonetheless, the shift from offline gross sales to on-line gross sales is so huge that a lot of firms are poised to win.
Etsy has clearly established itself as a type of e-commerce winners. The corporate’s platform connects patrons and sellers of do-it-yourself items, which is a rising area of interest that insulates it from the opposite e-commerce competitors.
Etsy’s 2020 numbers present that demand for the platform is hovering. The corporate ended the 12 months with 4.4 million lively sellers (up 62%) and 81.9 million lively patrons (up 77%). Whole spending on the positioning greater than doubled to $10.3 billion.
Etsy took full benefit of the surging demand. Income grew 111% to $1.7 billion. The highest-line progress was so sturdy that Ety’s internet earnings grew 265% to $349 million despite the fact that it considerably elevated its spending on advertising, product improvement, and hiring.
Administration does not assume the hypergrowth is ending anytime quickly. Income is anticipated to develop no less than 125% within the first quarter of 2020, and margin is anticipated to stay sturdy for the foreseeable future.
All of this goodness has pushed Etsy’s inventory to a well-deserved all-time excessive. With shares are buying and selling round 100 occasions 2021 earnings estimates, traders should pay as much as purchase the inventory proper now. Nonetheless, nice firms often commerce at a premium, and Etsy’s outcomes show that it’s a nice firm. I feel the outperformance is right here to remain.
Take a experience on this inventory
Adam Levy (Uber): Uber is properly positioned to capitalize on the return to journey and reopening the economic system. The corporate has the distinctive capability to leverage its two-sided community of drivers and prospects into new (and outdated) alternatives throughout its vary of companies. Different singularly targeted “gig-economy” firms haven’t got this functionality.
Uber’s most dear belongings are its native networks of drivers and prospects. During the last couple of years, administration took steps to exit markets the place its community wasn’t large enough to supply a aggressive benefit. It additionally bought off a number of non-core belongings. In consequence, Uber enters 2021 a extra targeted firm with a stronger community benefit.
That benefit will turn out to be useful as folks return to journey. Most notably, the supply enterprise must act as a tailwind for the extra worthwhile mobility enterprise, as Uber makes it simpler for purchasers and drivers to change between companies. The corporate has already seen the advantages as administration says the ride-hailing enterprise has come again quicker than different types of transportation.
Regardless of the huge downturn in mobility income final 12 months, the phase remained worthwhile on an adjusted EBITDA foundation. The reopening will trigger progress in Eats to sluggish, however bettering take charges and working leverage ought to convey it towards optimistic EBITDA. In consequence, administration expects the corporate as a complete will produce optimistic EBITDA in 2021, because the supply enterprise sees improved profitability and mobility bounces again.
Open the door to this journey inventory
Chris Neiger (Airbnb): Some traders could balk on the thought of investing within the home-sharing firm whereas we’re nonetheless within the midst of a pandemic, however there are two causes that will not matter quickly. First, the pandemic will finish and journey will return. Second, Airbnb is completely positioned to learn when it does.
Journey actually took a success over the previous 12 months, and Airbnb’s income fell together with it. The corporate’s gross sales dropped 22% within the fourth quarter. However you need to put that drop into context. Think about that the corporate’s fourth-quarter income of $859 million blew previous analysts’ consensus estimate of $748 million. And for the total 12 months 2020, income was down simply 30% in comparison with 2019 — throughout a time when primarily the complete world wasn’t touring.
With many components of the U.S. opening again up and coronavirus vaccines being distributed, Airbnb is optimistic that there shall be “a big journey rebound” this 12 months.
After which there’s Airbnb’s place within the journey area. Airbnb is already a transparent chief within the home-sharing market and as soon as extra folks really feel comfy touring once more there is no motive why bookings will not spike for the corporate. Airbnb provides distinctive experiences and leases that may’t be discovered anyplace else and you’ll wager that individuals who’ve been cooped at dwelling for the previous 12 months are itching for each.
Possibly I am biased towards Airbnb as a result of I used the service to take a four-month-long street journey with my household in 2019, however I am not the one one which’s been impressed with the corporate’s enterprise. Traders have pushed up the corporate’s inventory greater than 40% because it went public again in December.
These traders are specializing in Airbnb’s $3.4 trillion complete addressable market alternative and perceive that the corporate provides leases and experiences that its opponents cannot match. For traders in search of a novel firm that is more likely to see enormous progress as journey rebounds, Airbnb appears to be like like an incredible choose.
This text represents the opinion of the author, who could disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even one in every of our personal — helps us all assume critically about investing and make selections that assist us develop into smarter, happier, and richer.