Watchlist Q3 2021

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This week we are taking a look at the third watchlist of 2021. None of the stocks referenced below are buy recommendations. This list is designed to act as a starting point for you when doing your own due diligence and represents stocks that are on my own radar but I have not invested in at the time of writing.


Airbnb, Inc.

Ticker: $ABNB

Sector: Communication Services

Market Cap: $85.5 billion

Share Price: $138.59

Overview

Airbnb is a company that operates an online marketplace for lodging and tourism activities. Since it was founded in 2007 it has grown to 4 million hosts who have welcomed over 800 million guest arrivals to approximately 100,000 cities in almost every country and region across the globe. Hosts on Airbnb are everyday people who share their worlds to provide guests with the feeling of connection and being at home. 

Airbnb’s hosts are the foundation of the community and business. Stays are made possible by hosts. It is their individuality that makes Airbnb unique. Hosts span more than 220 countries and regions and approximately 100,000 cities. Airbnb enables hosts to provide guests access to a vast world of unique homes and experiences that were previously inaccessible. The role of the host is about more than opening their door. A great host enables guests to find a deeper connection to the places they visit and the people who live there.

The community of hosts started by sharing their spare bedrooms on Airbnb in a few large cities. Soon, hosts listed entire homes, cabins, treehouses, boats, castles, and luxury villas in big cities, small towns, and rural communities in nearly every corner of the world. Hosts generally fall into two categories: individual and professional. Individual hosts are those who activate their listings directly on Airbnb through our website or mobile apps. Professional hosts are often those who run property management or hospitality businesses and generally use application programming interfaces to list their properties on our platform.

Latest Financial Results - 31 March 2021

Total revenue for Q1 2021 was $887 million, an increase of 5% year-over-year.

Airbnb attracted over $10 billion of bookings in Q1 2021, an increase of over 50% from the same prior year period as travel returns.

Q1 2021 net loss of $1.1 billion was impacted by several significant items, including a $377M loss related to the repayment of debt, a $292M non-cash mark-to-market adjustment for warrants, and a $113M expense related to a lease no longer deemed necessary.

64 million nights and experiences were booked in Q1 2021 representing an increase of 13% year-over-year. More than a year after the start of the pandemic, Airbnb’s business has continued to prove highly resilient, with strength in North America, domestic travel, nearby travel, and long-term stays.

Final Words

Airbnb’s total market opportunity is projected to be $3.4 trillion comprising of:

  • $1.8 trillion for short-term stays

  • $210 billion for long-term stays

  • $1.4 trillion for experiences.

If we ignore the pandemic for a second which obviously had a severe impact on travel and tourism, Airbnb had 247 million guests in 2019, which only accounted for 3.8% of the estimated 6.5 billion global paid overnight trips that year. If Airbnb can capture just 5% of its addressable market that would equate to $170 billion in revenue. 

Airbnb is a service that most of us have probably used. The blockbuster IPO occurred in December 2020 and was one of the hottest public offerings of the year. The share price hit an all time high of $219 in February 2021. After the IPO lockup period expired in May 2021 the share price has retracted by over a third. At the current valuation, I think Airbnb offers a very attractive opportunity for long term investors. 


Callaway Golf Company

Ticker: $ELY

Sector: Consumer Cyclical

Market Cap: $5.9 billion

Share Price: $31.89

Overview

Callaway Golf was incorporated in 1982 with the main purpose of designing, manufacturing and selling high quality golf clubs. The Company has evolved over time from a manufacturer of golf clubs to a leading manufacturer and distributor of a full line of premium golf equipment and accessories. More recently, in an effort to diversify and explore new growth opportunities, the Company expanded its soft goods business to include lifestyle product lines that are complementary to golf.

In 2017, the Company expanded its soft goods business with the acquisitions of OGIO, a leading manufacturer and distributor of premium storage gear for sport and personal use, and TravisMathew, LLC, a leading designer and distributor of premium golf and lifestyle apparel, gear and accessories. In January 2019, the Company acquired JW Stargazer Holding GmbH, the owner of the international, premium outdoor apparel, footwear and equipment brand, Jack Wolfskin, which further enhanced the Company's lifestyle category and provided a platform in the active outdoor and urban outdoor categories. 

In early 2021, the Company acquired Topgolf International. Topgolf is a leading tech-enabled golf entertainment business, with an innovative platform comprising its groundbreaking open-air venues, revolutionary Toptracer technology, and innovative media platform. 

Callaway is now an unrivaled tech-enabled golf company delivering leading golf equipment, apparel and entertainment, with a portfolio of global brands. Through an unwavering commitment to innovation, Callaway manufactures and sells premium golf clubs, golf balls, golf and lifestyle bags, golf and lifestyle apparel and other accessories, and provides world-class golf entertainment experiences through Topgolf.

On the topic of golf, massive congratulations to fellow Irishman Séamus Power who claimed his first PGA tour win last week at the Barbasol Championship in Kentucky. Delighted for him.

Latest Financial Results - 30 March 2021

Q1 2021 consolidated Net Revenue of $652 million, a new record for the Company and a 47% increase compared to the first quarter of 2020. This increase was driven by the strength of the legacy Callaway business, which increased 26% compared to the first quarter of 2020, as well as $93 million related to the addition of four weeks of the Topgolf business. 

Q1 2021 Income from Operations of $76 million, an increase of 85% compared to the first quarter of 2020. The increase in income from operations was led by a $50 million increase in income from operations from the legacy Callaway business as well as an incremental $4 million from the addition of four weeks of the Topgolf business.

Q1 2021 Net Income of $272 million compared to $29 million in the first quarter of 2020. 

Final Words

The acquisition of Topgolf could prove to be a great funnel for non-golfers into the golfing world. Families and groups come to Topgolf as an entertainment venue more than anything else. Each group pays an hourly rate to reserve a bay, where they are treated to a variety of golfing games, comfortable seating, and table service to make the experience more enjoyable.

With its numerous amenities and bar-like atmosphere, Topgolf serves as a unique introduction to the sport. Roughly half of all visitors to a Topgolf location in 2019 categorized themselves as "non-golfers." According to a Topgolf survey, 75% of its non-golfer customers expressed interest in playing on an actual course within the following year. 

With only 65 locations around the globe currently, Topgolf clearly has room for venue expansion both domestically and internationally. 


PLBY Group, Inc.

Ticker: $PLBY

Sector: Consumer Cyclical

Market Cap: $1.0 billion

Share Price: $27.03

Overview

PLBY Group is a pleasure & leisure company serving consumers around the world with products, services, and experiences to help them look good, feel good, and have fun. Their flagship brand, Playboy, is one of the most iconic and recognizable lifestyle brands in the world, driving more than $3 billion in consumer spend annually across 180 countries.

The company first went public in 1971 before founder Hugh Hefner succeeded in taking the company private in 2011. After a decade, the company re-entered the public markets by merging with a blank cheque company popularly known as SPACs, or Special Purpose Acquisition Companies named Mountain Crest Acquisition Corp in early 2021.

The company mission is “to create a culture where all people can pursue pleasure”. This builds upon nearly seven decades of fighting for cultural progress rooted in the core values of equality, freedom of expression, and the conviction that pleasure is a fundamental human right.

PLBY offers consumers a lifestyle of pleasure & leisure in four high-growth categories namely;

  • Sexual Wellness

  • Style & Apparel

  • Gaming & Lifestyle

  • Beauty & Grooming

It offers sexual wellness products, such as condoms, lubricants, libido enhancers, bedroom accessories and sex toys, intimates and lingerie, intimacy kits, CBD-based arousal offerings, and adult content; style and apparel products for men and women; gaming and lifestyle products, including digital casino and social games, and other home and hospitality offerings; and beauty and grooming products for men and women, such as skincare, haircare, bath and body, grooming, cosmetics, and fragrance. 

In addition, the company licenses content for programming on Playboy television; trademarks under multi-year arrangements with consumer products, online gaming, and location-based entertainment businesses; and programming content to cable television operators and direct-to-home satellite television operators.

Latest Financial Results - 31 March 2021

Revenue grew 34% year-over-year to $42.7 million, driven by 114% growth in direct-to-consumer revenue in the comparable period.

Net loss was $5.0 million compared to a loss of $2.4 million year-over-year, largely due to a $13.8 million increase in selling and administrative expenses as the Company incurred $6.3 million of non-recurring items related to the closing of its recent business combination, including a $2.7 million increase in stock-based compensation expense. 

The company reported net assets of $179.1 million up from $83.0 million year-over-year.

Final Words

Ultimately, the bull case for PLBY Group revolves around the Playboy brand which is comparable to companies like Coca-Cola and Nike in terms of global awareness. The company notes that Playboy is currently among the top 20 most licensed brands in the world with a 97% brand awareness. The result is that the company immediately commands a higher retail premium with limited advertising and marketing requirements. With this strong brand comes a significant earnings opportunity given the potential for expanding margins in the direct-to-consumer segments.

Another new area the group is pursuing is opportunities in the market for non-fungible tokens "NFTs". A couple of months ago, the company announced it was partnering with Nifty, a platform that allows people to buy, sell and store digital art and collectibles, in a blockchain-powered marketplace. The partnership will officially launch in Q2.

There isn’t a huge amount of information readily available about PLBY which would indicate it is a stock that is very much under the radar. There is no annual report available for 2020 as the merger occurred in early 2021 as I mentioned above. With a forward P/E of 31.8 and a Price/Sales ratio of 6.6 this stock could arguably be classified as a value play despite possessing a strong brand.


Check out last quarters watchlist if you missed it Watchlist Q2 2021.

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Happy investing

Wolf of Harcourt Street

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Disclaimer: I am not a financial adviser and I am not here to give specific financial advice. The opinions expressed are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The information is based on personal opinion and experience, it should not be considered professional financial investment advice. There is no substitute for doing your own due diligence and building your own conviction when it comes to investing.