Prediction: These 3 Phenomenal Stocks Are Set to Soar

Peter Lynch, one of the greatest investors of all time, has said: "I can't say enough about the fact that earnings are the key to success in investing in stocks. No matter what happens to the market, the earnings will determine the results."

I believe this. Therefore, as a long-term investor, I try to watch earnings growth and predict where it will be in five years or so. The idea is that if earnings go up, the stock price eventually will as well. The ups and downs along the way are just noise.

However, I was recently reminded of just how patient investors have to be sometimes. Take Sprouts Farmers Market as an example. Its earnings per share (EPS) has consistently increased since it went public 11 years ago. But after going nowhere for 10 years, Sprouts' stock has skyrocketed 200% in the past year, finally reflecting its long-term EPS growth.

Investors must stay patient because sometimes it can take time for earnings to lift a stock price higher. But sooner or later, they will be rewarded. Therefore, patience is needed for investors in Airbnb (NASDAQ: ABNB), PayPal Holdings (NASDAQ: PYPL), and PubMatic (NASDAQ: PUBM). But here's why I believe earnings are headed higher for this trio of phenomenal stocks.

With over 125 million nights and experiences booked in the second quarter of 2024 alone, Airbnb is a well-known and well-adopted travel booking platform. Hosts list their spaces for rent as well as posting tailored travel experiences.

Travelers go to the platform to book, and Airbnb sits in the middle, quietly taking its high-margin cut of the deal.

Indeed, Airbnb's business model is extremely lucrative. With its second-quarter profit margin of 20%, few companies can surpass its profitability. And from the perspective of free cash flow, things are even better with a 41% margin.

If there's a knock against Airbnb, it's that the platform is already large, and growth is consequently slowing: Second-quarter revenue was up only 11% year over year. That's why management is turning its attention elsewhere.

The truth is, Airbnb's core platform is rock solid -- millions of people use it without prompting from advertising. This is allowing management to enter a "new phase." It aims to launch multiple new businesses every year. Many will fail. But it hopes that a small percentage will succeed and contribute to the growth of the company.

Airbnb's earnings are strong and should stay strong. And if this phenomenal stock can find new sources of growth, earnings could head higher in the coming years, lifting the stock price.