In a recent column, I wrote: “Young people often are early adopters of products and companies that end up being wildly successful.” I noted that Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA), which were both extraordinarily popular with young consumers in their heydays, wound up growing tremendously. Consequently, I think it’s quite noteworthy that, according to Goldman Sachs, “when compared to their predecessors, Millennial and Gen Z consumers are more likely to value experiences over physical possessions. ” Moreover, these generations’ spending power is set to climb going forward, Goldman notes.
Given these points, it’s quite likely that the shares of many successful experiences companies will surge a great deal over the coming years. With that said, here are three experience stocks that are well-positioned to thrive over the medium term and the long term.
Booking Holdings (BKNG)
Booking Holdings (NASDAQ:BKNG), the owner of Priceline and other online travel agencies, enables many millions of consumers to have great travel experiences.
And with travel trends staying very strong, BKNG’s business has been booming. Last quarter , for example, the firm’s top line jumped 18% versus the same period a year earlier to $4.8 billion, while its gross travel bookings climbed 16% year-over-year. Similarly, its EBITDA, excluding certain items, rose 18% YOY.
Analysts, on average, expect BKNG’s earnings per share to climb to $174 this year and $205 next year versus $152 in 2023. Given this strong, expected growth, the firm’s current forward price-to-earnings ratio of 19.9 is quite low.
Moreover, showing confidence in its own outlook, the firm decided to start paying out a dividend last quarter, and the name now has a 1% dividend yield.
Of course, the dividend will also make buying and holding BKNG stock slightly more lucrative for investors.
Smith & Wesson (SWBI)
For most readers of this column, shooting guns probably doesn’t come to mind when they think of recreational experiences. I understand that because I wouldn’t think of shooting as a great way to spend time either.
But for many millions of Americans, shooting is indeed an important recreational activity. And anecdotally, two of my brothers-in-law, both of whom are millennials, love shooting and own many guns.
On March 8, investment bank Craig-Hallum upgraded Smith & Wesson’s (NASDAQ:SWBI) stock to “buy” from “hold” and hiked its price target on the shares to $18 from $14.
The bank believes that the demand for the firm’s guns is strong, and should be boosted by the upcoming U.S. elections. What’s more, Craig-Hallum expects SWBI’s profitability to increase and predicts that it will benefit from low inventories at its channel partners.
All three Wall Street analysts who have issued notes on the name in the 90 days that ended on March 12 have “strong buy” ratings on it.
MGM Resorts International (MGM)
Casino owner MGM Resorts (NYSE:MGM) is poised to get a big boost in the short term from the Super Bowl, which was held in its hub of Las Vegas last month. And over the longer term, MGM and MGM stock should be helped by the success of the firm’s online gambling joint venture, BetMGM.
The revenue of Vegas’ casinos is widely expected to surge due to the Super Bowl. Moreover, during MGM’s earnings conference call last month, CEO William Hornbuckle said “The game was another strong hotel and casino event for us with…three of the top five room revenue days ever recorded and near-record event gaming volumes.”
Since MGM stock is actually down about 10% from last month’s peak, while the Street is often conservative about buying shares based on potential, positive catalysts, I don’t believe that the full impact of the Super Bowl on MGM’s financial results is close to being priced into the shares.
Nevada is slated to report Las Vegas’ casino data for February towards the end of this month. That report is likely to ignite a rally by MGM stock.
BetMGM’s top line, meanwhile, is growing by about $5o0 million annually, and its EBITDA climbed more than $300 million last year, enabling it to generate positive EBITDA in the second half of 2024.
What’s more, the joint venture expects its EBITDA to come in at about $500 million in 2026. The latter number should significantly boost MGM’s financial results and MGM stock.
On the date of publication, Larry Ramer held a long position in MGM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
