A stock market crash can be a harrowing experience to endure, and watching the value of your portfolio fall can cause temptations to sell. However, asset price fluctuations are an everyday and regular occurrence. People buy and sell stocks daily, and sometimes factors outside of the control of specific companies can cause more motivated sellers than buyers.
So it is prudent for long-term investors to keep some cash on hand during these times to buy stocks at lower prices. If there is a market crash soon, here are three companies that could make excellent buys: Roblox ( RBLX -0.47% ), Airbnb ( ABNB 8.46% ), and Meta Platforms ( FB 3.60% ).
The metaverse pioneer
Metaverse pioneer Roblox has been experiencing a surge in revenue and new users since the pandemic’s onset. The company has grown from 18.4 million daily active users in its third quarter of 2019 to 47.3 million in Q3 2021. Roblox’s platform is free to join. It makes money by selling an in-game currency called Robux. The currency allows users to buy premium content and experiences not available to the free users, including items like a virtual hat or shirt.
The business is lucrative — Roblox earned $509 million in revenue in its most recent quarter, more than double the amount in the same quarter the previous year. Perhaps more importantly, Roblox generated $181 million in cash from the $509 million in revenue. The increase in users, revenue, and cash flow has investors excited about Roblox. The stock is on fire, up 47% in the past month alone.
A more convenient way to travel
Worldwide travel facilitator Airbnb was devastated at the pandemic’s onset. Few people wanted to leave their homes and travel to a new location with a deadly virus in circulation. Fortunately, billions of doses of effective vaccines have been administered, and folks are cautiously traveling again. Airbnb is reaping the reversal benefits, and its revenues are back above 2019 levels.
Notably, Airbnb offers travelers more options than traditional hotels: single travelers can book a room inside a host’s apartment, and families can rent a whole house. The better-fitting features are partly what is allowing Airbnb to gain traction with consumers.
Airbnb’s success is reflected in the numbers. Its trailing twelve-month free cash flow reached $1.6 billion in the most recent quarter, up from $194 million at the same time in 2019. By this metric, the company is far stronger now than before the outbreak — not an easy task for a travel company.
Investors have noticed. Airbnb’s stock is trading at a price-to-sales ratio of 20, which is not cheap.
A social media giant turning into a metaverse company
Meta Platforms was formerly known as Facebook. The company changed its name to signal its shifting focus on the metaverse. Still, it could take a decade before most of the company’s revenue and profits are generated from the new segment. For now, investors will have to be contented with whatever Meta Platforms can muster out of its social media focus.
Fortunately for investors, that’s a massive, growing, and lucrative business. The company has over 3.5 billion monthly active users across its family of apps. It makes revenue — lots of it — by showing advertisements to folks when they open the app and start browsing. In fiscal 2020, Meta generated $86 billion in sales, up more than tenfold from about $8 billion in 2013. Similarly, earnings per share grew to $10.09 in 2020 from $0.60 in 2013.
Roblox, Airbnb, and Meta Platforms are all excellent businesses. Investors would be prudent to set some cash aside in case a stock market crash makes them available at much lower prices.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.