IInflation dominated the headlines this week, with the consumer price index rising 8.5% in March, its strongest year-on-year expansion in 2022 so far. The last time US inflation reached this level was in 1981, showing just how uniquely positioned the country is today.
However, higher inflation does not affect how I invest. Even without inflation, finding high-quality companies with sustainable competitive advantages to hold on to for decades is essential. Often these high-quality companies have pricing power – the ability to raise prices without losing customers – which allows them to remain resilient in the face of higher input costs. Companies I bought this week — Airbnb (NASDAQ: ABNB), FIGS (NYSE: FIGS)and Nvidia (NASDAQ: NVDA) — are great examples, so I was excited to add more to my posts.
Trading at 18 times sales at the time of this writing, Airbnb’s valuation is near its lowest ever as a public company, but its business is operating at record highs. The company provides a hub for unique travel experiences, and its revenue jumped to $6.0 billion in 2021, up 25% from 2019. It has been hit hard by the pandemic, but unlike other hotel companies, Airbnb has already surpassed pre-pandemic revenue. levels. Additionally, the company expects to have surpassed Q1 2019 activity in terms of nights and experiences booked in the last quarter.
The company’s free cash flow also exceeded $2.1 billion last year, up from $97 million in 2019. Airbnb can use this cash generation to invest heavily in its platform, which should help the business to thrive during this period of inflation. Hosts on the platform may be able to raise prices in line with the inflation the US is experiencing today due to Airbnb’s strong brand, allowing the company to benefit from revenue more stable.
Due to the company’s reputation, customers will continue to use its platform to find and book vacations despite these price increases, which may not be the case for other competitors like Vrbo. This puts Airbnb in a great position: demand for the business can hold steady while competitors face inflationary pressures. Although not guaranteed, I am willing to put my money on the best dog in the business.
FIGS is another company with one of the strongest brands in its industry. Selling hospital scrubs for healthcare workers, FIGS has a Net Promoter Score (NPS) – a customer satisfaction score of -100 to 100 with a score of 70 considered “world class” – above 80. is higher than the world’s largest garment enterprises, even Nikewhich only has an NPS of 52.
This impressive brand has allowed the company to demand a pretty penny for its products. In 2021, FIGS’ gross margin was nearly 72%, unheard of for apparel companies. Therefore, FIGS is in an ideal position: either it can keep its prices the same while benefiting from strong margins, or it can increase its prices to fight inflation, probably retain the majority of its customers and maintain its lead. on its competitors.
No matter what the company does in the short term, the long-term outlook for FIGS is very promising. By 2025, it expects to have $1 billion in annual revenue, representing compound annual growth of nearly 25%. FIGS will face inflationary pressures, but it still looks well positioned to succeed in the short and long term.
If you think artificial intelligence, gaming, self-driving, and data usage will continue to grow over the next decade, Nvidia is one of the best places to invest today. The company makes the semiconductor chips necessary for these industries to thrive, and instead of picking the best horse in each race, you can bet on Nvidia – whose chips are the gold standard and used around the world.
Nvidia’s dominance can be seen in its finances. Revenue soared 61% year-over-year to nearly $26.9 billion in its 2022 fiscal year, which ended Jan. 30. Additionally, the company’s free cash flow exceeded $8 billion for the year, up 72%.
The company’s valuation is high at 20 times sales, but its opportunity is even greater. It has huge addressable markets, including $150 billion in artificial intelligence software, $100 billion in games, and $300 billion in the enterprise computing space. As the company continues to generate cash, it can continue to invest in its product portfolio. This will allow it to capitalize on these huge markets, which is why I’m bullish on Nvidia for the next decade.
Find out why Airbnb, Inc. is one of the top 10 stocks to buy now
Our award-winning team of analysts have spent over a decade beating the market. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*
They just revealed their top ten picks of stocks investors can buy right now. Airbnb, Inc. is on the list — but there are nine others you might be overlooking.
Click here to access the full list!
* Portfolio Advisor Returns as of April 7, 2022
Jamie Louko owns Airbnb, Inc., FIGS, Inc. and Nvidia. The Motley Fool owns and recommends Airbnb, Inc., Nike, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.