Bitcoin has emerged as one of the standout investment options over the past decade, showcasing remarkable growth despite its notorious price fluctuations. For many who invested early and held onto their assets, the returns have been transformative. However, the current landscape does not guarantee that Bitcoin is a favorable buy for new investors. Unlike traditional stocks, cryptocurrencies do not offer cash flow, which is a vital component for many investors. Instead, these digital assets often depend on the willingness of others to invest, making them inherently more speculative and risky than most stocks, which are typically tied to the consistent cash flows of established businesses. Below, we explore two stocks that present more reliable investment opportunities compared to cryptocurrencies, primarily due to their substantial cash flow generation for shareholders.
1. Alphabet’s AI Promise
First on the list is Alphabet (GOOG), a leading technology powerhouse that is at the cutting edge of artificial intelligence (AI) advancements. The parent company of Google, YouTube, Google Cloud, and Waymo, Alphabet boasts a market capitalization nearing $3 trillion, making it one of the most valuable companies globally. While the rise of AI poses potential challenges to various software and tech firms, Alphabet stands to gain significantly from the AI revolution. With billions of users across its various platforms, the company has a vast pool of data to enhance its AI tools, including its Gemini project. Additionally, Alphabet has developed its tensor processing unit (TPU), a specialized chip that allows it to handle AI tasks more efficiently than competitors like OpenAI. These strengths are expected to drive considerable revenue growth from AI initiatives in the coming years. Last quarter, subscription revenue surged by 20% year-over-year to reach $11.2 billion, including income from Gemini, while Google Search also performed admirably, recording a 12% revenue increase to $54 billion. Remarkably, Alphabet generated $67 billion in free cash flow over the past year, even as it invests heavily—$67 billion in capital expenditures to enhance its data center capabilities, with projections of $75 billion for 2025. In contrast, OpenAI has yet to achieve positive cash flow, underscoring Alphabet’s position as a prime long-term investment in the AI sector.
2. Traveling the World with Airbnb
Airbnb (ABNB) is also poised to leverage AI to enhance user experience on its travel platform, but its investment narrative is more straightforward for prospective buyers. The home-sharing service is expanding its footprint into new geographical markets, which is crucial for increasing the number of hosts and bookings on its site. By customizing its marketing strategies and adapting the platform for various countries, Airbnb has recently experienced growth in bookings, especially in markets like Japan and Germany. Despite achieving $23.5 billion in gross booking value last quarter, Airbnb’s operations are still heavily reliant on key markets such as the United States, the United Kingdom, and France. However, entering new tourist destinations like Japan and Mexico could facilitate accelerated growth in the near future. It’s important to note that Airbnb’s revenue is solid; it reached $11.6 billion in the past year, marking a 13% increase from the previous year, and a staggering 243% growth over the last five years. Although Airbnb is a relatively new player in the market, it is generating substantial free cash flow, totaling $4.3 billion in the last year. This cash flow is being strategically used for share buybacks, a practice also adopted by Alphabet, which should enhance earnings per share (EPS) over time. Analyzing the financial fundamentals reveals that both Alphabet and Airbnb are more favorable long-term investments compared to the uncertain nature of cryptocurrencies.
