JThe easing of COVID-19 restrictions and pent-up travel demand helped several vacation rental companies recover last year. However, the Omicron outbreak has impacted the pace of recovery.
As uncertainty associated with COVID-19 prevails, BTIG analyst Brad Erickson highlights another concern – the potential headwinds of supply in the vacation rental market.
The analyst cited a recent Redfin report, which said the pandemic-driven second home boom was coming to an end given the significant drop in demand in March, and marked the second consecutive month of decline.
Demand for vacation homes skyrocketed in mid-2020 as many affluent Americans embraced remote working and mortgage rates fell to record lows. However, demand over the past two months has been impacted by rapidly rising mortgage rates, which reached 4.67% at the end of March.
In addition to higher mortgage rates, Erickson believes that raising upfront fees for second home loans from 1% to 4% (effective April 1) could further impact future demand.
Therefore, the analyst believes that the vacation rental segment, which includes players like Airbnb and Expedia, will likely face supply issues over time “given the inherent lack of inventory in ADRs. most popular (and highest). [average daily rates]) local. »
Meanwhile, thanks to the easing of COVID restrictions, airlines and other travel companies are gearing up for more business this spring and summer.
In this context, we used the stock comparison tool TipRanks to determine Airbnb, Expedia and Booking Holdings against each other and discuss the opinions of Wall Street analysts on these stocks.
Airbnb, a leading online vacation rental booking marketplace, has 4 million hosts and 6 million active listings at the end of 2021. The company’s hosts span more than 220 countries and regions, with 85% of hosts located outside of the United States.
Airbnb ended 2021 on a high note, with strong Q421 results thanks to a robust travel recovery. T421 revenue grew 78.3% year-over-year to $1.5 billion and topped 2019 levels. Company fell to EPS of $0.08 after loss per share of $11.24 in Q420.
Booked nights and experiences, a key Airbnb platform scale metric, reached 300.6 million for the full year 2021, up 56% from 2020, but 8% below levels. 2019. Gross bookings of $46.9 billion reflect growth of 96% over 2020 and 23% over 2019.
Overall, 2021 revenue grew 77% to $6 billion and exceeded 2019 levels, supported by improved room nights and experiences booked and higher ADRs. Airbnb’s loss per share narrowed significantly to $0.57 in 2021 from $16.12 in 2020.
Airbnb continues to invest in its platform and designed over 150 enhancements in 2021 to improve user experience. It is also working on new offerings to address changing dynamics since the pandemic, such as remote working and increased average commute times.
Notably, long-term stays of 28 nights or more remained Airbnb’s fastest growing category in terms of travel duration and accounted for 22% of gross nights booked at T421, up 16% from at T419.
Recently, analyst BTIG Jacques Fuller said its tracking data reflects a post-Omicron rebound in bookings from February and March, which should put Airbnb on track to meet forecast room nights booked. However, the analyst pointed out that his forecast of 95 million room nights booked in Q122 is below buy-side expectations of more than 100 million.
Fuller thinks the bull case on Airbnb isn’t about the recovery of booked room nights from 2019 levels, it’s about “catching up with the pre-COVID growth rate,” and Q122 results may not offer much of a boost. support to justify the bullish case.
Fuller reiterated a Hold rating noting that Airbnb faces tougher comparables and has a high valuation multiple.
Meanwhile, the Street is cautiously optimistic about Airbnb, with a moderate buy consensus rating based on nine purchases, 18 bookings and one sale. Airbnb’s average price target of $197.92 implies 23.62% upside potential from current levels.
The online travel agency Expedia has an impressive portfolio of more than 20 brands and more than 200 travel sites, including Expedia.com, Travelocity, Hotels.com, CheapTickets, CarRentals and Orbitz. Its online marketplace Vrbo competes with the likes of Airbnb in the vacation rental space.
Expedia’s fourth-quarter 2019 revenue rebounded 148% year-over-year to $2.3 billion, but was below 2019 levels and slightly behind Street expectations. Disruptions caused by Omicron impacted first quarter results.
However, adjusted EPS of $1.06 beat analyst estimates and marked a significant improvement from the adjusted loss per share of $2.64 in Q420, supported by higher revenue and cost savings.
Overall, Expedia revenue grew 65% to $8.6 billion in 2021, with room nights up 35% and gross bookings up 97% to $72.4 billion . However, revenue and gross bookings are down from 2019.
Given improved trading conditions, Adjusted EPS jumped to $1.65 in 2021 from a loss per share of $8.78 in 2020.
Expedia CEO Peter Kern expects a strong recovery in 2022 as he believes the travel industry and travelers are becoming more resilient with each passing wave of COVID-19.
Deutsche Bank Analyst Lee Horowitz believes the market is underestimating the power of the post-COVID travel recovery and Expedia’s share in this “incredibly robust” demand backdrop.
Horowitz adds that while global leisure accommodation bookings are conservatively up in the high numbers in FY22 compared to FY19, he has a “high degree of confidence” that Expedia will beat Street’s bookings and revenue estimates.
In line with his optimism, Horowitz launched Expedia’s coverage with a Buy rating and price target of $218.
Meanwhile, the street is split on Expedia, with a moderate buy consensus rating based on 13 purchases and 13 reservations. At $218.88, Expedia’s average price target implies 22.55% upside potential from current levels.
Booking Holdings offers online travel and related services in more than 220 countries through six core brands: Booking.com, Priceline, Agoda, Rentalcars.com, KAYAK and OpenTable.
The rebound in travel helped Booking generate better-than-expected revenue and profit in the fourth quarter of 2021. Fourth-quarter revenue grew 141% year-over-year to $3 billion. The company saw a 100% increase in room nights booked and a 160% increase in gross bookings to $19 billion. Adjusted EPS rose to $15.83, a staggering increase from an adjusted loss per share of $0.57 in Q420.
For 2021, revenue grew 61% to $11 billion. Gross travel bookings jumped 116% to $76.6 billion and room nights booked increased 66.4% to 591 million. Adjusted EPS increased from $4.71 to $45.77 in 2020.
Despite continued uncertainty associated with COVID-19 and geopolitical tensions, the company expressed optimism that travel demand will continue to recover given encouraging summer bookings in Western Europe and North America.
In an SEC filing in early March, Booking highlighted the suspension of its operations in Russia and Belarus and outlined overnight trends for February and the first week of March. Russia and Ukraine combined on a destination basis represent a very low single digit percentage of the company’s total gross bookings.
Booking revealed that nights booked in February were nearly in line with 2019 levels. However, in the week to March 6, nights booked were down about 10% from 2019 levels. The company said stated that the recent slowdown in the trend of overnight stays booked was due to exposure to Eastern Europe, primarily Russia, and to a lesser extent Western Europe, which remains slightly above above 2019 levels.
In response to this update, Fuller reduced its estimates for room nights, bookings and EBITDA for Q122. However, the analyst pointed out that its tracking data indicates that the decline in gross bookings has narrowed since the company’s update.
Fuller added that trends have stabilized since early March and concerns about risk to annual numbers have eased. Despite lower estimates for Q122, Fuller maintained its 2022 EBITDA estimate at $4.9 billion on a 30% margin.
Fuller reiterated a Hold rating on BKNG but did not provide a specific price target.
On TipRanks, Booking has a moderate buy consensus rating supported by 15 purchases and seven reservations. Booking Holdings’ average price target of $2,711 suggests upside potential of 24.28% over the next 12 months.
Conclusion
Despite short-term headwinds like geopolitical tensions, the continued recovery in travel bodes well for Airbnb, Expedia and Booking Holdings. Average price targets from Wall Street analysts point to similar upside potential for these three stocks. While analysts are cautious on all three stocks, the proportion of analysts with bullish sentiment is higher for Booking Holdings.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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