3 growth actions sheltered from supply chain shortages


Investors don’t necessarily think of the supply chain when looking at potential stocks. But supply chain shortages could slow down an otherwise high-growth inventory, and there’s always a dance between a retailer and their suppliers to get the right mix of products when they’re needed.

Most of the solid retail inventory you know has enough leverage to effectively manage the supply chain. But even large chains can be taken by surprise, and many companies are still grappling with the fallout from the pandemic. This is a real benefit to a stock when it is fully immune to supply chain disruptions.

Three Motley Fool contributors came up with their top picks for stocks that are immune to supply chain issues and they chose Airbnb (NASDAQ: ABNB), DraftKings (NASDAQ: DKNG), and Activision Blizzard (NASDAQ: ATVI).

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Around the world in thousands of rentals

Jennifer Saibil (Airbnb): If you’ve ever booked a vacation rental through Airbnb, you are like millions of people around the world who take advantage of this platform that puts global destinations at their fingertips.

The beauty of the model is that Airbnb doesn’t need to invest a dime in the rentals themselves (although they do pilot some of them as well). costs), but it also allows for an agile and flexible process that has proven to be very resilient as the world faces a global pandemic. In this sense, Airbnb does not have to worry about the shortage of the international supply chain which has impacted other industries.

In fact, Airbnb made a comeback from the pandemic doldrums with an almost 300% jump in revenue in the second quarter and an almost 200% increase in booked nights and experiences.

The net loss also contracted significantly, from nearly $ 600 million in 2020 to $ 68 million in the second quarter of 2021. As the business grows, adding rental units and overnight stays reserved, it should start showing a profit. And that moment may not be so far away.

Without operating its own hotels, Airbnb sales matched Hilton Worldwide Holdings to $ 1.3 billion and roughly doubled Hyatt Hotelssecond quarter sales.

Setting up new rentals is as easy as recruiting new hosts, and the company has recruited 4 million hosts by the end of the second quarter.

Despite all of this, the market is still not overly impressed and the stock has only risen 9% since the start of the year. I would say there are two factors here: valuation and loss. The shares are trading at 21 times sales over 12 months, and the company is still recording a loss. However, it’s in high growth mode, and if you can see the potential here, including the benefits of not needing to rely on a supply chain, you should consider stock for your portfolio.

A mobile betting company with no physical goods offered

Parkev Tatevosian (DraftKings): DraftKings offers daily fantastic sports, mobile sports betting and online games on an online platform. The company is immune to the supply chain issues that have recently hampered the operations of so many companies. The coronavirus pandemic is disrupting the supply chain. An outbreak at a major port could send the whole team home and shut the terminal down for a few weeks. Any business that depends on physical assets is at risk of disrupting its operations at any time.

Therefore, growth stocks like DraftKings that are immune to supply chain shortages present a lower degree of risk in comparison. In fact, DraftKings can benefit if there are major supply issues. This is because if customers have the same level of income but fewer things to spend money on, the services and products that remain available will benefit.

DraftKings is already growing rapidly, increasing revenue by 298% in its fiscal second quarter. It will only add fuel to the fire if it gains a competitive advantage from supply chain disruptions. Nonetheless, the lower degree of risk for DraftKings operating during a pandemic gave management the confidence to raise its annual revenue growth target to a midpoint of 94%.

Investors shouldn’t take this to mean that the business comes without risk. However, the main risks of DraftKings are regulatory and not related to the pandemic. The company is at the goodwill of the States allowing it to operate in their jurisdictions. That being said, states seem to have a good appetite to license DraftKings to market its services. Just last month, DraftKings expanded its mobile sports betting offering from 12 to 14 states.

The stock is not cheap, trading at a futures price-to-sell ratio of 19. The company’s excellent growth prospects and lower degree of risk during the pandemic already appear to be built into the stock. . Still, investors can put this growth stock on their list and look for an opportunity to accumulate stocks during a market correction.

New Catalysts Could Supercharge This Leading Gaming Stock

John Ballard (Activision Blizzard): The trend for digital entertainment has received a huge boost during the pandemic. Nowhere was this more apparent than the accelerating growth of one of the world’s best game makers. Activision Blizzard’s adjusted revenue, or reservations, climbed 32% in 2020, following the successful release of Call of Duty: Mobile in October 2019 which attracted 92 million new players.

Most of Activision Blizzard’s employees worked from home, which allowed the company to continue delivering new content to gamers during the pandemic. In Call of Duty, players can buy Call of Duty points to unlock additional content. In the first half of 2021, in-game spending for all of the company’s games represented 66% of total bookings.

Activision Blizzard ended the second quarter with 408 million monthly active users across all titles, up from 327 million in the second quarter of 2019. This is nearly double the number of global paying subscribers to Netflix. The video game industry is expected to end 2021 at $ 175 billion in total sales, according to the Newzoo market research, making it one of the largest forms of entertainment in the world.

Activision Blizzard’s global reach and list of top gaming brands, including World of warcraft, Monitoring, and the popular mobile game candy Crush, positions the company for more growth. The future of this industry favors large companies that have the resources to deliver deeply engaging gaming experiences. In the past year, Activision generated $ 2.49 billion in free cash flow on $ 8.8 billion in bookings. It generates more than enough cash to fund the development of the game while paying a small dividend to shareholders, with an annual return currently of 0.6%.

As booking growth slows this year after such a big year in 2020, Activision’s ability to continue delivering content to gamers makes it a great stock to consider in these crazy times of COVID-19 and news threats. variants of the coronavirus. Despite recent leadership changes at Studio Blizzard following a civil lawsuit, the company announced in its second quarter earnings call that it was still on track to release a new blockbuster list over the years. next years from Diablo and Monitoring franchises that could make the recent drop in the stock price a timely opportunity to buy stock.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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