The Nasdaq Composite tentatively emerged from its bear market last week. However, many shares on this growth-driven index are trading well below the prices they reached at the end of 2021. Here are two beaten-down stocks to buy right now, both of which I reckon could head much higher in future.
Powerful brand
Airbnb (NASDAQ: ABNB) shares have fallen 49% over the last 18 months.
Yet as a business, it continues to recover strongly from the disruption caused by the once-in-a-century pandemic.
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In its Q1 last week, the company reported that revenue rose 20% year on year to $1.8bn. The home rental firm already generates very healthy free cash flow — $3.4bn last year — due to its asset-light business model. But it also recorded a quarterly net profit of $117m, proving that its platform can be profitable on a GAAP basis.
However, while these results beat analyst estimates on the top and bottom lines, management offered cautious guidance for the current quarter. That provoked a sell-off in the shares and could cause further near-term volatility.
As a long-term investor, I’m more interested in where this business could be in five years time. And on that front, I’m very bullish, especially due to its growth prospects in India.
CEO Brian Chesky sees the South Asian country powering Airbnb’s growth over the next 10 years. Night bookings are already growing rapidly there, as a rise in internet penetration and access to smartphones leads to more Indians making hotel reservations online.
Moreover, India’s 63 biggest cities are now home to more than a quarter of its middle class. And the country is set to have the world’s largest middle class in future. The opportunity here seems very substantial.
Airbnb estimates its total addressable market (TAM) at $3.4trn. And its brand name is so strong that it’s become a verb: “We’re Airbnb-ing in Paris.”
With potentially many years of profitable double-digit growth ahead, I’m looking to buy the dip soon.
Powerful technology
Unlike Airbnb, the pandemic was the making of Moderna (NASDAQ: MRNA), as its Covid vaccine helped save millions of lives. It also provided the company with a massive $17bn war chest to aggressively target dozens of other diseases. These include flu, heart disease, HIV, and even cancer.
However, sales from its vaccine have declined substantially as the the pandemic has thankfully moved to an endemic phase. And because it’s the company’s only approved product (for now), that’s put pressure on the share price, which is down 71% since September 2021.
The stock could fall further if any of its many potential medicines fail in clinical trials.
However, I’m very optimistic on a multi-year time frame. Moderna’s technology enables scientists to write their own mRNA instructions and have them delivered directly into the body’s cells. Similar to software code, these instructions can be tweaked and improved. The cost advantage of that should be huge.
Its vaccine for respiratory syncytial virus (RSV) was recently put on the fast track by regulators. And trial results for its personalised vaccine for skin cancer demonstrated that it reduced the risk of recurrence or death by 44%.
So, despite a potentially bumpy road ahead, the long-term upside could be enormous. I’ve bought the shares to hold for at least the next five years
