It’s been a little over six months since the first case of COVID-19 was confirmed in the US, and the economic disruption caused by the disease is unusual. Many small businesses have had to close, millions of people have lost jobs or cut wages, and the resulting recession and ongoing closure measures have made it even more difficult for those businesses that are open. But despite the upheaval, there have been some companies showing signs of resistance indicating that they will emerge even stronger from this crisis.
Etsy (NASDAQ: ETSY), Square (NYSE: SQ), en AppFolio (NASDAQ: APPF) have hit the market well over the past six months and are building a solid foundation during this crisis to set the stage for a bright future. Let’s explore why these are top three files you can buy and keep for the next decade.
Stock returns over the last six months, through August 11, 2020 versus the S & P500. ETSY data provided by YCharts
Etsy: thriving in the face of challenging times
Etsy is an online marketplace where artisans can buy their handicrafts for sale to millions of interested buyers. This company is particularly resilient because more than 90% of its sales people are a team of someone working from home. Without warehouses, no supply chain, nor brick and mortar stores, this company is well protected against coronavirus disorders.
In addition, the sellers have shown themselves to be adaptable to the needs of the markets. In the past four years, 110,000 salespeople stepped up to sell face masks, with $ 346 million in sales. But it is not only masks that have been in demand. Etsy says the three-digit year-on-year increase in annual sales has increased this past quarter from home-like items such as pets and furniture (+ 128%), craft supplies (+ 138%), and beauty and personal care items (+ 187%) . The growth in these categories helped drive unusual topline results for the last four years and has positioned the market as a place to buy daily supplies in addition to crafts.
Q2 gross market sales (GMS) grew 147% year-over-year in the last four years, which generated revenue of 137% (including the acquisition of the company Reverb). What’s even more exciting is the expansion of their community over the four years. Active buyers and sellers (those with at least one purchase or one sale in the last 12 months) increased 41% and 35% year-over-year, respectively. This is likely to stimulate future growth as customers place themselves in this market once they have discovered it. In the quarter, there was a 51% increase in repeat buyers (those with two or more “purchase days” in the past year) and a 64% increase in “regular” buyers with more than six purchase days in a year.
The company is innovating with search with artificial intelligence-driven and augmented reality-display capabilities to make the buying experience even better. These are just a few ways that it helps to maintain its online marketplace for specialty handmade items and everyday goods relevant for years to come.
Image Source: Getty Images.
Square: Take advantage of a diverse ecosystem
Square’s recent main results of a 64% year-over-year Q2 revenue increase driven by a 600% increase in bitcoin sales obscure the full picture of what’s happening with its business. Revenue from its sales segment fell by 17% to $ 723 million as small businesses faced recession-driven spending contracts. But its Cash app, which provides consumers with banking services such as deposits, debit card payments, payments by individuals, bitcoin transactions, and share purchases, was a bright spot in the quarter.
Excluding bitcoin, Cash App revenue was a whopping 140% up to $ 325 million at the back of 6 million new subscribers, increased product adoption, and usage growth. These gains drove an impressive $ 264 million in gross profit, up 156% from the previous year.
Bitcoin sales totaled $ 875 million in the quarter, but this is a low-margin company that makes only $ 17 million in gross profit. While it does not contribute much to the finish line, it does help attract customers to Cash App. Without bitcoin revenue, the company’s topline was flat at $ 1.05 billion year over year. This result is not stellar, but the economy will eventually turn around and if that happens, Square’s customers will return to growth. Add to that the growing popularity of their Cash App and the resilience of their diverse ecosystem, and investors would probably do well to buy and stick to this stock for the next 10 years or more.
AppFolio: Providing essential services for property managers and law firms
AppFolio provides cloud software that enables property managers and law firms to run their businesses. It costs subscription fees, but generates 64% of its revenue from its Value + transaction-based services such as marketing, payments, and viewer screening. You would think that a company that gets 90% of its revenue from the rental company would wrestle now, but it is not. It turns out that their software delivers essential business functions that are more critical than ever in our socially distinct world. Communicating with tenants, collecting rentals, managing maintenance, or even renewing leases can all be done online with their platform, allowing property managers to remain effective and secure while working remotely. The essential nature of these services helped total revenue by 27% up 27% year-over-year for Q2, driven by its Value + segment by 32%.
The company is innovating by adding a “virtual showings” feature and a streamlined online lease renewal process to make it easier for tenants. It has released a leasing dashboard for its high-end clients to gather key metrics and collect manual data. For its legal clients, it expanded the functionality of e-signatures to help with social distance.
It is quite possible that the rental business will continue to suffer as the pandemic passes. But with a solid history of growth and impressive year-on-year customer additions of 9% for property management and 6% for legal in the last quarter, it’s clear that AppFolio’s products are critically important, regardless of the economic environment. . That should give investors confidence to buy and hold this stock for the next decade or more.
Outlook for 2030
Companies are facing the most difficult economic conditions since the 2008/2009 financial crisis, with no end in sight. Despite everything, these three companies have shown extraordinary resilience and are focused on improving the customer experience, which will put them on solid footing as the pandemic subsides.
You would do well to buy one or all of these growth stocks and hold the shares for the next 10 years or longer.
