Airbnb, Atlassian: Is there value in these growth stocks?
- Airbnb and Atlassian are both down significantly from their 52-week highs
- Airbnb sales increased 57% Q/Q while Atlassian sales increased 35% Q/Q
- Valuation continues to be elevated for both stocks, with Airbnb and Atlassian currently trading at tenths off sales
Travel rebound boosts Airbnb revenue
Airbnb Inc (NASDAQ:) continues to grow rapidly, largely because more travelers are turning to hotel alternatives. Average occupancy has slowly increased and is now close to 52%, with an average price per room of around $140.
On the last call, the CEO said the following:
“From a growth perspective, we have surpassed 103 million room nights and experiences booked. Now, that was our highest quarterly number ever. Revenue was $2.1 billion, up 58% from a year ago or 64% excluding currency.
Gross bookings were $17 billion, up 27% from a year ago or 34% excluding currencies. Now, revenue and gender-based violence were 73% higher than in the second quarter of 2019, significantly outperforming the travel industry. From a profitability standpoint, we had our most profitable second quarter ever. »
Since COVID shut down global economies, many people who were looking to travel are now making up for lost time, resulting in a significant increase in travel from a base effect. Many countries are still partially closed, resulting in below-average travel.
Despite the global macroeconomic headwinds, the travel industry is relatively resilient. Travel is expected to continue to grow through 2023 and occupancy rates are expected to reach around 55-60%, although it remains to be seen whether prices will rise. This should help to continue to generate higher incomes.
The current price/earnings ratio is 50 and the net profit margin for the last quarter stands at 16%. The net profit margin could easily hit 20% over the next two quarters as Airbnb tightens costs and improves utilization. The combination of the two could drive the P/E to 30x earnings.
Airbnb prices aren’t too different from hotel prices, and questions remain about whether people will choose to forgo hotels over Airbnb and whether the temporary rental trend will last. But for now, Airbnb continues to perform well and customers remain loyal to the platform.
Atlassian continues to outperform
Atlassian Corp (NASDAQ:) is another company that continues to experience a significant pace of growth. The company’s Jira software has become a developer staple and boasts one of the highest gross profit margins in the general tech industry, at 83%. Although companies are cutting back on their tech talent, the CEO said the following:
“We’ve observed over the years that developers tend to be the last roles companies cut. We believe this will continue to hold true, especially for the overwhelming number of organizations undergoing digital transformation.
Second, while our products punch above their weight in terms of value, Atlassian is a relatively small line item in overall IT budgets and likely not where customers are looking to cut costs.
Despite the fact that Atlassian’s SaaS and applications business is increasingly the focus of many developers’ work, it only retains around 7% market share, which means it has plenty of headroom. growth. Their main software product, including Jira, Confluence and Trello, which was a recent acquisition, continues to outperform and the lack of competition works in its favor.
But profitability issues remain and Atlassian continues to have very high operating expense levels, which has led to losses in recent quarters. Analysts believe management is focused on growth and won’t be looking to step off the pedal for at least a few more years as it seeks to take market share to a much higher level.
In the meantime, cash flow from operations remains around $883 million, which should ensure the company remains capitalized for the foreseeable future.
Both of these stocks could play a long-term role with those looking for stocks with a strong competitive edge and plenty of room for growth.