Why Airbnb Stock Isn't The Best Travel Recovery Play

By Trefis4 days ago

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Airbnb (NASDAQ: ABNB) stock is down by close to 15% from its all-time highs, trading at about $188 per share, due to the broader sell-off in high-growth technology stocks. However, the outlook for Airbnbs business is actually very strong. It seems reasonably clear that the worst of the pandemic is now behind us and there is likely to be considerable pent-up demand for travel. Covid-19 vaccination rates in the U.S. have been trending higher, with around 30% of the population having received at least one shot, per the Bloomberg vaccine tracker. Covid-19 cases are also well off their highs. Now, Airbnb could have an edge over hotels, as people opt for less densely populated locations while planning longer-term stays. Airbnbs revenues are likely to grow by about 40% this year, per consensus estimates. In comparison, Airbnbs revenue was down only 30% in 2020.

While we think that the long-term outlook for Airbnb is compelling, given the companys strong growth rates and the fact that its brand is synonymous with vacation rentals, the stock is expensive in our view. Even post the recent correction, the company is valued at over $113 billion, or about 24x consensus 2021 revenues. Airbnbs sales are likely to grow by about 40% this year and by about 35% next year, per consensus estimates. There are much cheaper ways to play the recovery in the travel industry post-Covid. For example, online travel major Expedia (NASDAQ:EXPE) which also owns Vrbo, a fast-growing vacation rental business, is valued at about $25 billion, or just about 3.3x projected 2021 revenue. Expedia growth is actually likely to be stronger than Airbnbs, with revenue poised to expand by 45% in 2021 and by another 40% in 2022 per consensus estimates.

See our interactive dashboard analysis on Airbnbs Valuation: Expensive Or Cheap? We break down the companys revenues and current valuation and compare it with other players in the hotels and online travel space.

[2/12/2021] Is Airbnbs Rally Justified?

Airbnb (NASDAQ: ABNB) stock has rallied by almost 55% since the beginning of 2021 and currently trades at levels of about $216 per share. The stock is up a solid 3x since its IPO in early December 2020. Although there hasnt been news from the company to warrant gains of this magnitude, there are a couple of other trends that likely helped to push the stock higher. Firstly, sell-side coverage increased considerably in January, as the quiet period for analysts at banks that underwrote Airbnbs IPO ended. Over 25 analysts now cover the stock, up from just a couple in December. Although analyst opinion has been mixed, it nevertheless has likely helped increase visibility and drive volumes for Airbnb. Secondly, the Covid-19 vaccine rollout is gathering momentum in the U.S., with upwards of 1.5 million doses being administered per day, and Covid-19 cases in the U.S. are also on the downtrend. This should help the travel industry eventually get back to normal, with companies such as Airbnb seeing significant pent-up demand.

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