While many people are checking off items on their holiday shopping lists, we're making a list (and checking it twice) of stocks we would be happy to buy as 2025 comes to a close. Our list includes 3 giants in their respective fields, but are still Hidden Gems for investors who know what to look for. Companies discussed: LULU, GOOGL, GOOG, ABNB Host: Jason Hall, Jon Quast, Dan Caplinger Producer: Anand Chokkavelu Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What hidden gem stocks are discussed for the end of 2025?
Do you still have some items to buy on your holiday shopping list? What about your holiday stock shopping list? Today is Thursday, December 18th. Welcome to Motley Fool Money. I'm your host today, Jason Hall. And I'm joined by Motley Fool analysts Dan Kaplinger and John Quast to discuss some of our favorite hidden gem stocks that look like great buys as 2025 comes to a close.
Get ready for a fun Foolish Roundtable discussion. If I say hidden gems, you probably think I'm talking about small esoteric companies that nobody's ever heard of, right? That's true, but it's not the only place that you can find hidden gems. And on today's show, we have three giants and their respective industries. Airbnb is one of those dominant companies. John, you brought it to the table.
It's a name that people think of when describing the entire short-term stays industry now. It's become the verb, too. Since the first day of trading post-IPO, the stock's up almost double, but it peaked a month later, and it's way down since then, in early 2021. John, why is this on your list as a hidden gem stock worth buying?
Let me give you my elevator pitch here for Airbnb to start it off. People aren't giving up this short-term rental model. Airbnb is the dominant player in this space. I think it has a brand moat, and it's printing cash like few companies do. Eventually, these factors should make Airbnb stock a winner. I know it hasn't performed great in recent years, but I think that it will eventually catch up.
Let's talk about one of the traits I like of a hidden gem, and that's reasonable growth in an expanding market. Airbnb is growing its revenue at a double-digit pace, 10% in the most recent quarter, expecting high single-digit in the upcoming quarter. It's not red hot, but that is reasonable growth. There's market research pointing to ongoing growth in this space as a whole.
And AirDNA is one of the third parties that puts out reports on this. And what's so interesting to me is that AirDNA has showed that there are rental property owners who are willing to put... they're listing on multiple platforms. That's the majority. But if you're only listing exclusively, you're not listing with Airbnb's competitors. You're listing on Airbnb exclusively.
It's either Airbnb alone or Airbnb Plus, but never without Airbnb. That, to me, shows the moat here. One of the reasons I like it in this expanding market.
There's more you like, too.
Yeah, for sure. I also like companies that exhibit this trait of having this relentless drive and curiosity to finding new business opportunities. Airbnb is definitely one of those. It's invested $200 million this year in experiences and services. When you look at its bookings in the third quarter, half weren't attached to a place to stay. I'm talking about its experiences and services.
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Chapter 2: Why is Airbnb considered a hidden gem stock worth buying?
But I just never expected a traditional hotel to be so interested in Airbnb. I think that that's a potential growth driver as well.
That's the kind of optionality that I think could be compelling. It's a little bit of maybe Amazon's ad business on its own platform for inventory, where there's a lot of competition for consumer goods. It's the same way for Airbnb. It also says to me that Airbnb, we're not afraid of the hotel industry. Come give us some money. Put your properties on our platform.
We'll take a little money from you. We're still going to win. Up next, Dan makes the case for Lululemon in the midst of growing competition and a change in the C-suite.
Stay with us.
Welcome back to Motley Fool Money. Over the long term, Lululemon has been a huge winner. It's up more than 15X since going public. But in recent years, it has not been a great investment. Investors have lost money from the peak back in 2023. We can go all the way back to 2020. Beginning of 2020, the stock is still down. The business has lost some of its luster.
Dan, what's going on with Lululemon today that makes it compelling to you as a buy?
I've been following Lululemon for a long time. It's interesting to me how stocks that arguably start out more looking like Rule Breakers can end up emulating hidden gem-style stocks later on. We all know Lululemon's yoga apparel business changed the retail industry. It opened up an entire new category of these so-called athleisure products.
It brought a new meaning to casual Fridays at the office. It's been instrumental and spawned a whole bunch of other specialty retail concepts as well. Business had done really well, but after briefly topping $500 a share late in 2023, early in 2024, we've seen the stock plunge 70%. Well, what happened? Growth trends slowed. They even reversed in the core North American market.
Even now, the company is guarded about its immediate outlook.
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Chapter 3: What growth trends are impacting Airbnb's future performance?
It seems like it's trying to bottom, but even most recent quarter, we saw same-store sales in the North American segment drop. There's a lot of questions about Lululemon right now, but the thing I focus on is, we have seen Lululemon be resilient before. Turn back the clock, what, 10, 11 years or so, from around 2012 to 2014, the stock was down about 50%. What happened?
Yoga pants were suddenly see-through. We had all these quality control issues. That was exacerbated by some comments from the then-CEO, now former CEO, and founder, which I won't bother to repeat here, but it took a while for the company to right the ship after that big boondoggle. But the payoff was, the stock was a 10-bagger by 2021.
So, come back to today, now we're facing a similarly interesting moment. Lululemon just announced its quarterly results earlier this month, but it also said CEO Calvin McDonald is stepping down. Shareholders were happy with that move. More recently, we've seen activist investors come in
Elliott Management has apparently taken a billion-dollar stake in Lululemon stock, has suggested a former Ralph Lauren executive named Jane Nielsen for the job. So, very much the stock in play right now. A lot of investors trying to see, is this the thing that breaks Lululemon out of its slump?
It's so interesting, Dan, that we're going to experience a change here at CEO. I'm a little bit worried about a new management team coming in here and overcorrecting, because I really don't think things are as bad as it appears. I think you have good apparel businesses and bad ones.
Bad ones have piling up inventory, and that leads to markdowns, and it leads to a complete disintegration of its profit margins. You look at Lululemon, that's not what's happening. It's a good business. Inventory is fine. Margins are fine. It's just having a slowdown.
I'm worried that a new manager could come in here and overcorrect when, in reality, it's stay the course and do what you need to do to keep appealing to your customers.
I agree with a lot of what you said, John. I will admit, I'm less than convinced that this recent trend of trying to pick up superstar CEOs for consumer goods companies that are going through some temporary problems, I just don't think that's as important as just going back to basics. Let's make some good products. Let's build up a core base of loyal customers, make them feel valued.
But here's the thing. Investors have bid down Lululemon stocks so far that they're essentially assuming no real chance of successfully reigniting the growth fires here. I'm not that pessimistic. I think somebody new in the corner office might be able to reverse that negative sentiment and get the stock moving in the right direction again.
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