The tech industry has seen remarkable growth over the past decade. Breakthrough companies can provide significant funding and operate at a loss as they try to adapt their products to the market. Investors often prioritized and ignored metrics such as user growth and total addressable marketCompanies will generate income.
However, those times are over. Businesses must now find ways to become profitable or face devastating consequences. The CBInsights graphic below illustrates how once-leading companies have been reduced to mere shadows.
One company on this list deserves a closer look, especially since its results will be released on Tuesday, May 9: Airbnb (NASDAQ:ABNB).
Airbnb has consistently developed a solid marketplace that connects those who own apartments and rooms to rent with those who need a place to stay. Although COVID significantly impacted operations in 2020, the company has since expanded its operationsaverage daily price, number of nights and attractions sold, gross booking values and occupancy rate. These critical metrics show that, despite tough comparisons, Airbnb is poised for further growth.
Let's take a look at why Airbnb is a technology company worth considering for the long term.
Metric growth looks strong
The travel industry has been hit hard by COVID, making it difficult to evaluate Airbnb's metrics. However, I would like to present some key graphs that highlight the company's promising future.
Let's talk about nights and experiences first. More nights means more revenue for Airbnb, so it's important to monitor this metric.
In the first quarter of last year, Airbnb had 102 million roomnights and experiences, setting a high benchmark. Despite the challenging macro environment, which we will discuss in the next section, I believe the company can outperform this benchmark.
As you can see in the chart above, the number of nights and experiences was decreasing towards the end of last year. However, this pattern is consistent with previous years, where Q1 and Q2 typically saw an increase followed by a decrease (except in 2021 due to the pandemic).
Each night booked has a price, so we can use the data to calculate Airbnb's average daily rate. This number has increased sharply in the wake of the pandemic, but has declined slightly in recent quarters. Due to inflation and demand, it should increase again in the coming quarters.
Finally, by combining the two charts above, we get the gross booking volume. As we approach the results for the first quarter, we expect this ratio to increase.
Travel demand shows no signs of slowing down
Flights, hotels and Airbnb stays are getting more expensive and there is no indication that this will happen anytime soon. The reason for these high prices is the growing demand for travel and consumers' willingness to pay.
This was reported by the NPD parliamentary groupone-third of Americans want to travelmorein 2023. This result is confirmed by e.ggiven to you, which shows that more than 50% of Americans intend to travel in the next six months.
Recent earnings reports from companies like Booking Holdings (BKNG) also provide valuable information on the favorable environment in the first quarter.explained the president of the company:
We had a strong start to the year with first quarter accommodations and gross bookings reaching our highest quarterly levels ever, both exceeding our previous expectations.
These positive metrics increase expectations for Airbnb to deliver a solid quarterly report. This bullish outlook is one of the main reasons I increased my position before the profit release. The second key factor influencing my investment decision is Airbnb's product leadership.
Exceptional Product Leadership
It's rare to find a company as committed to creating a product that users will love as Airbnb. CEO Brian Chesky actively seeks feedback on Twitter and informs users about the most popular features.
Airbnb recently announced a number of new features aimed at improving the user experience. Looking for longer stays? Now you can search for "months". Want to see the total cost of your trip, including fees? No problem!
Another problem, house rules. A frequent Airbnb user may have faced excessive cleaning requests despite paying a significant cleaning fee.The company is working to make these policies more transparentand is considering punishing hosts with unreasonable demands.
For anyone investing (or considering investing) in Airbnb, I recommend following Brian on Twitter. The challenge is to bet on a founder-led company whose CEO is as committed to customer service as Brian appears to be.
Peak
Airbnb has become a popular name for short-term rentals. The company can sustain growth in this sector by offering its customers reliable services whether they are on vacation or working remotely.
Achieving this is difficult with over 4 million hosts on the platform, but Airbnb needs to ensure that all hosts prioritize the customer's best interest. While most do, in cases where they don't, the company has to go the extra mile.
CEO Brian Chesky's recent product releases and updates have focused on building customer trust, including: B. to reduce support response time and simplify post-visit verification. As Airbnb continues to improve its marketplace, trust will be a major focus, and the company appears to be making significant strides in building that trust.
In FY23, I expect Airbnb's growth to be slower year-on-year, but to remain in the double digits. I assume the company will be sold460 million nights and experiences, up 16.8% this year. This expansion will be due to the broader growth of the travel market and increased trust in the platform.
At a slightly higher average price per nightThe gross book value should amount to approximately USD 75 billion. Assuming a slightly reduced acquisition rate of 13% compared to 13.3% last year,Airbnb's revenue in 2023 should be around $9.75 billion. If the company maintains a net margin of 23%, then yes$2.25 billion net income.
With a reduced PE of 38, this leads to aMarket capitalization of $85.2 billion, up 12.7% from today.While the P/E ratio is below Airbnb's average, it is not the lowest the company has seen. Its strong link to short-term rentals and its ability to outperform competitors such as VRBO justifies this higher PE.
Opposite view
It's important to consider the opposite view, and for Airbnb, that prospect means a reduction in growth, leading to a decline in multiples.
Assuming all the other growth factors mentioned earlier, but reducing the multiplier to a still high level30x PE, Airbnb would have a valuation of $67 billion(or be overvalued by 11% today).
Even worse, if the company had been moving more in line with the market at 22x P/E,Airbnb's rating would have to drop by around 35%to reach this level.
As a long-term investor planning to keep Airbnb, I will also be keeping an eye on the company's relationship with "superhosts". These hosts play a key role in the future of Airbnb, and the platform must ensure their satisfaction. There are reports of some superhosts developing their own tools to bypass 10-15% of Airbnb fees. If this trend continues, I may have to reconsider my position.
Diploma
Investing is indeed storytelling, and for me, the story revolves around continuous growth and millennials' love of wandering coupled with a company that truly cares about its customers and strives to provide a unique experience.
Can it be argued that 38x PE is too high? Surely. Could it be argued that travel could be negatively affected by the looming recession that has been "approaching" for the last 18 months? Absolutely. But countering those fears is a company that has become synonymous with a thriving travel segment that shows solid execution and shows no signs of slowing down anytime soon.
I have a buy recommendation for Airbnb and will buy earnings on May 9th.
This article was written by
Ash Anderson
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I am a software engineer by profession and an enthusiastic market participant. As a traditional long-term investor, I use my own software to find the best companies at the best prices. My investment philosophy is primarily high-quality companies. Companies that have a significant advantage in their market or demonstrate the ability to reach the top. Software is my specialty, so in my articles I will often deal with this sector. I also deal in stocks that I believe are of high quality and worth investing, which are outside of the world of software. Video fans please visit my YouTube channel where I also discuss finance and stock research at youtube.com/ashanderson1
Analyst Disclosure: I/We have an advantageous long position in ABNB shares, whether through equity ownership, options or other derivatives. I wrote this article myself and it expresses my own opinion. I get no compensation for this (except Seeking Alpha). I have no business relationship with any of the companies listed in this article.
I am aiming to reveal Alpha:Past performance is not a guarantee of future results. No recommendation or advice is given as to whether a particular investment is suitable for a particular investor. Any views or opinions expressed above may not reflect the views of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment advisor or investment bank. Our analysts are external collaborators that include both professional and retail investors who may not be licensed or certified by any institution or regulator.
FAQs
Why should you buy Airbnb stock? ›
Wall Street thinks Airbnb has a ton of growth ahead of it
Wall Street analysts on average expect rapid earnings growth for Airbnb during the next four years. Data source: Nasdaq. That's a strong earnings forecast, and if Airbnb can hit these projections, investors shouldn't worry about the stock's most recent run-up.
They predict that the Airbnb stock forecasts will keep its average price above $300 during 2026 and hit a maximum price of $447. The stock's value will grow tremendously, with an average price of $542 in 2027 and an average price of $787 in 2028.
What to expect from Airbnb stock? ›Is Airbnb Stock a Buy or a Sell? Wall Street is cautiously optimistic about Airbnb, with a Moderate Buy consensus rating based on 16 Buys, 15 Holds, and two Sells. The average ABNB stock price target of $142.03 suggests 18.5% upside potential.
Is Airbnb going to be a good stock? ›Zacks' proprietary data indicates that Airbnb, Inc. is currently rated as a Zacks Rank 1 and we are expecting an above average return from the ABNB shares relative to the market in the next few months.
Why is Airbnb so profitable? ›Financial Model: Platform Tax.
Airbnb makes money by charging a service fee on top of each booking. Thus making money as more bookings go through it repeatedly. In 2021, Airbnb generated $5.99 billion in service fees.
Airbnb is a double-sided marketplace: customers pay a fee to rent and hosts pay a service fee. It is one of the strongest business models, similar to Amazon and eBay. It benefits from network effects: the more people join the platform, the more successful it becomes.
What is the prediction for Airbnb 2023? ›Strong numbers like these had investors enthused Wednesday. But so did the company's forecast for the first quarter of 2023. All in all, Airbnb expects to earn between $1.75 billion and $1.82 billion for the first quarter, which would be a healthy amount above last year's $1.5 billion.
Is Airbnb a good investment in 2023? ›According to the latest reports, the short-term rental industry will witness unprecedented growth in the coming years. This means that Airbnb rentals will also be profitable and prove to be a good investment for real estate investors.
What is the stock price prediction for Airbnb in 2023? ›Wall Street is certainly optimistic about Airbnb's prospects. Analysts expect the business to post year-over-year revenue and diluted EPS growth of 14.3% and 22%, respectively, in 2023.
Is Airbnb a good stock to buy long term? ›Airbnb shares are up well in excess of the Nasdaq in 2023 but still off their IPO price. The company posted its best year ever, with revenue, profit, and free cash flow soaring. Investors might consider buying the stock despite its elevated valuation.
What will Airbnb stock be worth in 2025? ›
It then predicted a dip to $139.38 by May 2024, slipping further to $134.24 by May 2025, with a future price of $129.10 by May 2026. The 5 year Airbnb stock outlook put the stock at $122.95. This would represent a modest rise of almost 3% from the current $119.37 level.
How much should you invest in an Airbnb? ›The average cost to start an Airbnb sits between $3,000-$6,000. This cost will significantly vary depending on the following items: Property purchase price. Home Loan Down Payment.
Is Airbnb a smart investment? ›It May Be More Lucrative Than Traditional Renting
A solidly booked Airbnb rental may be more profitable than renting the same property to a long-term single tenant. That's because you're usually able to charge more on a nightly basis.
Airbnb Attains Yearly Profitability for First Time in 2022, Breaking Records With Most Profitable Quarter Ever | Rental Scale-Up.
Will Airbnb continue to grow? ›Data source: Airbnb. YOY = Year over year. Airbnb management expects the company's revenue to rise 17%-21% year over year in the first quarter of 2023, which surpassed analysts' expectations for 13% growth.
How did Airbnb get so successful? ›Encourage Large-Scale Adoption. Despite the company's intimate focus, the product's wide-ranging appeal can be linked to the company's success. According to Burt Helm of Inc. magazine, the company supports more than 800,000 listings in many countries, enabling customers to look forward to local stays across the world.
How do I make my Airbnb successful? ›- Quality Photographs Make a Difference. ...
- Time. ...
- First Impressions. ...
- Individualized Experience. ...
- Price. ...
- Response Time. ...
- Installing a Lockbox. ...
- Legalities.
Airbnb competitors include websites like Vrbo, Booking.com, Tripadvisor, Agoda, Expedia, TUI Villas, TravelStaytion, HomeToGo, Plum Guide, and Google. Not all of them are vacation rental marketplaces.
Why is Airbnb better than its competitors? ›Since its inception in 2008, Airbnb has grown rapidly and gained market share. Because it provides lodging at lower prices than its competitor Booking.com, Airbnb is in a strong position to weather any economic storm.
Why do people prefer Airbnb? ›More Space
Yes, you can have a bigger hotel room, but it is more expensive. With the cost of a traditional hotel room, you can have more space with Airbnb. It's not the only space you'll gain when booking on Airbnb rather than hotels. Considering the cost of a stay, you'll get a longer stay on Airbnb than in hotels.
What is most important for Airbnb? ›
Stock up on the essentials
Guests will expect to find toilet paper, hand and body soap, towels, and linens, so make sure your space is stocked with all of these essential amenities. Airbnb recommends offering a minimum of: One towel per guest. One pillow per guest.
Airbnb is for finding a place where to live
Since the pandemic, Airbnb has launched projects such as “Live and Work Anywhere on Airbnb“ and promoting mid-term and long-term stays. However, the most significant development is the launch of an Airbnb-friendly apartment marketplace in late 2022.
Airbnb has been one of the most successful businesses of the past decade. The company has disrupted the hotel industry and created a new way for people to travel. Airbnb has been so successful because it is a platform that allows people to rent out their homes to travelers.
What is the stock price forecast for Airbnb in 2024? ›On average, Wall Street analysts predict that Airbnb's share price could reach $141.05 by Apr 20, 2024. The average Airbnb stock price prediction forecasts a potential upside of 17.64% from the current ABNB share price of $119.90.
What is the best investment for 2023 recession? ›The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.
Why are Airbnb stocks falling? ›Airbnb stock falls after short report says hosts 'directly compete' with platform. Airbnb (ABNB) stock fell as much as 6% on Thursday following the publication of a short report which argued that, among other problems, the company's top hosts have begun competing directly with Airbnb on new platforms.
Where do airbnbs make the most money? ›According to Tipalti's study, Hawaii is the US state with the highest average annual host earnings. There, Airbnb hosts make, on average, a whopping $73,247 per year.
Is it good idea to invest in 2023? ›The longer an investment window you give yourself, the more wealth you might gain over time. It's a smart idea to invest extra cash in 2023 if you're managing your bills well. Before you invest, make sure you have money set aside for emergencies and eliminate high-interest debt.
What stock will go up the most in 2023? ›| Company | Forward Sales Growth Next Year |
|---|---|
| Alphabet (GOOG, GOOGL) | +11.8% |
| Eli Lilly (LLY) | +19.4% |
| Match (MTCH) | +13.0% |
| Progressive (PGR) | +10.9% |
Earnings vs Market: ABNB's earnings (15.7% per year) are forecast to grow faster than the US market (14.7% per year).
How much will Airbnb stock go up? ›
Stock Price Forecast
The 29 analysts offering 12-month price forecasts for Airbnb Inc have a median target of 140.00, with a high estimate of 165.00 and a low estimate of 98.00. The median estimate represents a +22.53% increase from the last price of 114.26.
Among the list of investments, a notorious name in the hospitality sector pops up: Airbnb. The industry disruptor based out of San Francisco received total funding of USD 112 million from Bezos. This investment have further accelerated the home-sharing platform's rapid growth.
Is Airbnb a buy sell or hold? ›Airbnb has received a consensus rating of Hold. The company's average rating score is 2.42, and is based on 17 buy ratings, 13 hold ratings, and 3 sell ratings.
Who owns the most Airbnb stock? ›Airbnb Stock Ownership FAQ
Who owns Airbnb? Airbnb (NASDAQ: ABNB) is owned by 40.81% institutional shareholders, 3.41% Airbnb insiders, and 55.78% retail investors. Brian Chesky is the largest individual Airbnb shareholder, owning 13.66M shares representing 2.13% of the company.
However, a good investor using a reliable Airbnb ROI calculator can easily find short term rentals with cap rates above 8%. And 10% is seen as the sweet spot for a lucrative property. But finding properties with these high ROI estimates can be challenging if you're not using a calculator tool.
What is the average profit from owning a Airbnb? ›| STATE | AVERAGE ANNUAL HOST EARNINGS 2021 | AVERAGE ANNUAL HOST EARNINGS 2020 |
|---|---|---|
| California | $54,461 | $33,718 |
| Florida | $53,209 | $28,012 |
| South Carolina | $49,641 | $28,547 |
| Utah | $48,568 | $36,206 |
The pandemic-related travel boom of 2021 and 2022 has helped Airbnb (ABNB 1.93%) have one of its best years ever. Yet despite its strong business performance as of late, the vacation rental company's stock is down 30% year to date. The ongoing bear market downturn is largely to blame for Airbnb's big fall.
Will Airbnb do well in a recession? ›Efficient use of working capital has positioned Airbnb for success with regards to a potential economic downturn. An impending recession in the second half of 2023 could influence market psychology and drive the stock price down in the second half of the year.
Can you make money investing in Airbnb? ›Despite what some may think, an Airbnb investment does not need to be a vacation rental home, as many use Airbnb for business travel and other life events that may bring them to any number of locations across the country. This means it's possible to have a profitable Airbnb regardless of where you're located!
Where is Airbnb most profitable? ›According to data shared by Mashvisor, one of the top Airbnb host calculators, Nashville in Indiana is one of the US cities that offer the highest short-term rental cash on cash returns. Hosts can expect a monthly short-term rental income of about $5,000, with daily rates averaging at $260.