2 Tech Monopoly Stocks That Can Help Make You Rich

Monopolies can be bad for consumers, but they are good for investors.

Especially if you find a company with a dominant market share in a large and growing market, it’s a good idea to put your money behind it. Putting aside any regulatory concerns, these companies will have higher profit margins and wider economies of scale because their monopoly status prevents competition.

Keep reading to see two tech monopoly stocks that could make you rich.

1. Airbnb: Changing the travel industry

Airbnb (Father B 2.26%) It started as a fringe idea — you host guests using your home as a hotel — but it’s resonated around the world, and the home-sharing platform now has more rooms than the big hotel chains.

Although competition in the home-sharing industry has grown, ie from Expedia‘s VRBO, Airbnb still dominates the industry with a 74.6% market share among home-sharing platforms, according to data analyst firm MScience. Recent results show how that monopolistic control can be exploited.

In the second quarter, the company posted adjusted EBITDA of $711 million on revenue of $2.1 billion, a 34% margin. Free cash flow margin was $38% better, and GAAP net margin was a solid 18%.

Airbnb is still growing rapidly, in part on the tailwinds of a recovery in the travel industry. Revenue rose 58 percent in the most recent quarter. It’s rare to find a company that’s growing at this rate and still so profitable. In contrast, most high-growth tech stocks aren’t profitable because they’re spending a lot of money to fuel that growth.

The amazing thing about Airbnb’s business model is that it spends almost nothing on capital expenditures. In the first half of the year, it spent only $11 million of its $2 billion operating budget. That shows that the business is basically going at this point and the technology has reached the point where it can handle 6 million listings. Airbnb doesn’t need to invest in additional data centers, and unlike brick-and-mortar hotel chains, it doesn’t own residential properties and doesn’t need to spend money on maintenance.

Airbnb stock trades at 17 times this year’s free cash flow, and given its growth rate and serviceable market value of $1.5 trillion, the company looks like a good candidate to deliver multi-baggage returns. It has the potential to grow its market cap from $70 billion to $1 trillion today.

2. Alphabet: Internet Information Center

AlphabetS (GOOG -0.86%) (GOOGL -0.83%) Google may be the first name in tech monopolies. It has been the world’s leading search engine for a generation, with nearly 90% market share, and YouTube dominates the market at the same time.

Thanks to that huge market share, Google has built a formidable advertising business around search, and it’s proven to be especially strong in the current era of social media platforms. AppleLimitations on ad tracking.

In the second quarter, the company’s operating margin was 28 percent as it reported operating income of $19.4 billion on $69.7 billion. Google’s services business, which includes search, YouTube and other advertising businesses, is more profitable, generating a 36 percent operating margin.

With a market cap of more than $1 trillion, Alphabet doesn’t have the same upside potential as Airbnb, but its valuation makes up for it. The stock trades at a price-to-earnings ratio of 18.4, its cheapest in nearly a decade and the same P/E ratio. S&P 500That makes Alfalfa a bargain — growing faster and more profitable than the average S&P 500 stock.

While the recession may weigh on advertising demand, the company’s long-term prospects look bright, and there’s always the chance that Alphabet will strike gold with one of its businesses, such as Waymo’s autonomous vehicle business or the “other bets” segment. Its biotech arm, Calico.

Despite no success in other bets, the ad business alone could double the stock in a few years. If you’re looking for a proven stock to make money, Alphabet looks like a great choice.