Is There Value In These Growth Stocks?

Is There Value In These Growth Stocks?

sergeitokmakov / Pixabay AirBnB and Atlassian are both down significantly from their 52-week high. AirBnB and Atlassian are both down close to 50% from their 52-week high.

Sales for AirBnB grew by 57% Q/Q meanwhile sales for Atlassian grew 35% Q/Q.

Valuation continues to be high for both stocks with AirBnB and Atlassian currently trading at 10 price-to-sales

Both these companies continue to grow quickly at a time when growth stocks have significantly retreated, considering the future economics of the company there could be value in the stocks.

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AirBnB (NASDAQ:ABNB) continues to grow quickly largely as an increasing number of travelers look to alternatives to hotels. The average occupancy rate has been creeping up slowly and now is close to 52%, with an average price per room around $140.

During the latest earnings call the CEO stated the following:

“From a growth perspective, we exceeded 103 million nights and experiences booked. Now, this was our largest quarterly number ever. Revenue was $2.1 billion, up 58% from last year or 64%, excluding foreign exchange.

Gross booking value was $17 billion, up 27% from last year or 34% if you exclude foreign exchange. Now both revenue and GBV were 73% higher than in Q2 2019, significantly outperforming the travel industry. Now from a profitability perspective, we had our most profitable Q2 ever.”

Ever since COVID caused global economies to shut down a lot of people who were looking to travel are now making up for lost time, which is leading to significantly higher travel from a base effect. A lot of countries are still partially shut and that is leading to below-par travel.

Despite global macroeconomic headwinds, the travel industry is relatively resilient. Travel is expected to continue to grow into 2023, and occupancy rates should rise to around 55-60%, although it remains to be seen whether prices will go up. That should help continue to drive revenue higher.

The current trailing price-to-earnings is at 50, and the net profit margin for the latest quarter stands at 16%. The net profit margin could easily rise to 20%, over the next couple of quarters as AirBnB tightens costs, and improves utilization. The combination of the two could drive the P/E to 30x earnings.

AirBnB’s prices are not too different from that of hotels, and questions remain about whether people will choose to forego hotels over Airbnb, and whether the trend of renting temporarily will last. But for now, AirBnB continues to do well, and customers are sticking with the platform. Atlassian Continues to Outperform Atlassian (NASDAQ:TEAM) is another company that continues to see a significant pace of growth. The company’s Jira software has become central to developers and has one of the highest gross profit margins in the general tech industry at 83%. Despite companies cutting back on tech talent, the CEO stated the following: “We’ve observed over the years that developers tend to be the last roles companies scale back on,” they wrote. “We believe this will continue to prove true, especially for the overwhelming number of organizations undergoing digital transformation. Second, whilst our products punch above their weight in terms of value, Atlassian is a relatively small line item in overall IT budgets and likely not where customers look to reduce costs.” Despite the fact that Atlassian’s SaaS and apps business is increasingly central to many developers’ work it retains only about 7% market share, which […]

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