Airbnb earnings may show its stock is a bargain after 30% plunge
- In the market turmoil this year, travel stocks have presented an attractive risk-reward proposition
- Airbnb is an example of a good stock affected by the massive exit of investors from high-growth stocks
- Last year was the best year in the company’s history. Indications are that the platform is on track to complete another strong year
This coming week is full of revenue reports from some of the biggest travel or transportation companies in the market. Airbnb Inc (NASDAQ:) and Uber (NYSE:) report Tuesday, while Booking Holdings (NASDAQ:) and Expedia (NASDAQ:) report later in the week.
In the market turmoil this year, travel stocks have presented an attractive risk-reward proposition for investors. As demand for room and flight bookings surge after two years of pandemic-related shutdowns and restrictions, 40-year-high inflation and the risk of a looming recession have spoiled the party in one of the trades. of economic reopening the most appreciated.
As a result, some of these tech-driven travel stocks have waned as they fell out of favor. The ETFMG Travel Tech ETF (NYSE:), which tracks an index of companies involved in travel technology, has fallen more than 30% this year despite soaring demand for the services offered by these companies.
Amidst this uncertainty about future prospects, the sector continues to represent good long-term opportunities. If you are an investor sitting on the sidelines, looking for a good entry point, I think now is not a bad time to make the move. Airbnb, the world’s largest booking platform provider, is my preferred choice in this space.
San Francisco-based Airbnb has consistently shown since its launch in 2007 that it has a robust business model that has been very successful in disrupting the traditional hospitality industry. Still, the company’s share price, down 33% this year, shows investors aren’t yet fully convinced.
Airbnb, in my view, is an example of a good company hurt by a weak market amid a massive investor exit from high-growth stocks. The San Francisco-based booking platform has developed a business model flexible enough to deal with different economic challenges.
The most significant evidence of this adaptability came during the pandemic when travel demand suddenly plunged, casting doubts on the future of a company made public during one of the greatest health crises in modern history. . But Airbnb not only managed to weather the pandemic, it also thrived.
ABNB’s profitability metrics at all-time highs
Source: Investing Pro
The best year ever
The company ended 2021 with what its CEO Brian Chesky called the best year in its history. And everything indicates that the platform is on track to complete another solid year. It posted record second-quarter revenue and told investors the third-quarter period would produce another record sales figure. The home rental company also made a profit in the three months to June as desperate travelers continued to book homes despite rising prices.
Travelers are likely to book nights and experiences in Q3 that will see a jump of about 25% year over year, a rate similar to Q2. Even though travelers are taking a break from a hectic summer activity, that doesn’t mean Airbnb isn’t worth holding in a long-term portfolio.
Source: Investing Pro
According to one by Bernstein, ABNB is on track to become the largest Western travel platform over the next five years, noting that the space could experience high-low-single-digit growth in the future. The note adds:
“Airbnb is a unique travel company, with a triple moat of an ambitious brand, a unique product set, and a loyal customer base – all concentrated in one of the fastest swimming lanes in travel.”
It is also expected to be the most profitable online travel agency within two years, beating competitors such as Expedia and Booking.com, according to the note.
“Even if you have a negative outlook on travel demand, we would consider Airbnb the best stock to own given its more defensive stance, faster growth and more attractive valuation on a 4-year forward multiple. .”
One of the reasons that kept investors from buying ABNB was the stock’s high valuation relative to its competitors. But that changed after the recent sale. Airbnb is now selling about 10 times its sales for the 12-month period, up from 14 times in early May.
The current risk aversion environment has made investors reluctant to hold high growth stocks in their portfolio and Airbnb is certainly a victim of this prevailing trend. But the company is well positioned to remain a long-term player in the travel industry. The stock’s recent weakness offers an attractive buying opportunity.
Disclosure: At the time of writing this article, the author does not own the stocks mentioned in this article. The opinions expressed in this article are solely the opinion of the author and should not be taken as investment advice.
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