Top Picked Titans in the Stock Market, Steady No Matter the Economic Climate
In the ever-evolving world of business, some companies have proven to be resilient during economic downturns, and Airbnb, Netflix, and Etsy are no exception. These platform-based businesses have expanded market opportunities beyond traditional limitations and catered to enduring consumer demands with robust network effects.
Airbnb: A Broader Lodging Market
Airbnb, unlike traditional hotels, significantly expanded the lodging market by enabling individuals to monetize underused spaces. This market-expanding model allows it to thrive even when traditional travel slows since many users opt for affordable homestays during economic downturns.
With a total addressable market estimated at $3.4 trillion, Airbnb has reported strong growth since its founding in 2007. In the first quarter of 2022, over 100 million nights and experiences were booked, marking a 59% year-over-year increase. The last quarter also saw a gross booking value of $17 billion, indicating room for growth. Airbnb benefits from two major trends: longer stays and the long-term growth in global travel spending.
Netflix: Affordable At-Home Entertainment
Netflix benefits from its subscription-based streaming model, providing steady recurring revenue and strong customer retention. The demand for affordable, at-home entertainment tends to grow in recessions, making its service more attractive and resilient when discretionary spending tightens.
Netflix's revenue grew from $5.5 billion in 2014 to $29.7 billion in 2021. The operating income boosted from $403 million to $6.2 billion during the same period. A Netflix subscription costs less than $20 per month for the most expensive version, making it an affordable option for many households. The service is considered an all-weather stock due to its affordability and the fact that people watch movies and shows in all economic scenarios.
Etsy: A Vibrant Creator Community
Etsy's strength lies in fostering a vibrant creator community that turns passions into vocations. This platform thrives on peer-to-peer transactions and appeals to consumers seeking personalized, often more affordable products. Etsy's marketplace model not only scales easily but fosters a sense of community and economic participation that sustains it through downturns.
Etsy reported revenue of $585 million in the 2022 second quarter, exceeding analysts' consensus estimate of $556 million. The company added 6 million new customers in the second quarter of 2022, and Etsy's active sellers grew more than 40% over last year despite an increase in fees. Despite a 6% decrease in marketplace gross merchandise volume versus last year in the second quarter of 2022, Etsy's earnings per share (EPS) of $0.51 were down from $0.68 last year but exceeded the average analyst forecast of $0.32.
Etsy improved its search and ad functions, international shipping capabilities, and actively marketed its app in the second quarter of 2022. These efforts contributed to marketplace revenue rising 11% in the same period.
In essence, all three companies benefit from digital, platform-based business models that lower entry barriers for participants, create network effects, and address resilient consumer needs—travel, entertainment, and unique shopping. This positions them well for long-term growth and relative resilience during economic contractions.
Investing in technology-driven businesses like Airbnb, Netflix, and Etsy can offer resilient opportunities during economic downturns, given their digital platforms that cater to enduring consumer demands. These companies, namely Airbnb with its broader lodging market, Netflix as an affordable at-home entertainment solution, and Etsy as a thriving creator community, have reported strong growth and exhibited resilience during economic recessions.
