Can Airbnb maintain its profit streak?

Airbnb (ABNB -0.24%) is expected to release its first quarter 2022 results after markets close on Tuesday, May 3. The travel facilitator was devastated at the start of the pandemic as consumer mobility declined.

Now that billions of people have been vaccinated and feel safer leaving their homes, Airbnb is recovering stronger than ever. For the first time in its history, the company recorded two consecutive quarters of profits. Investors will be watching to see if he can maintain that streak when he releases Q1 results.

Image source: Getty Images.

Airbnb is growing faster than the travel industry

Note that Airbnb’s business is seasonal. Most of its income and profits are made during the busy summer season, when the weather is warm and the children come home from school. This was certainly the case again in 2021. Airbnb posted net income of $834 million in the third quarter, which ended September 30, compared to net income of $55 million in the fourth quarter, which ends on December 31. fell from $2.2 billion in Q3 to $1.5 billion in Q4. However, even though seasonality caused a quarter-over-quarter decline, the results were significant improvements over the prior year.

Global spending on hotels and resorts fell to $610 billion in 2020 from $1.47 trillion in 2019. It rebounded to $950 billion in 2021, but is still a long way from fully recovering. the pandemic. The good news for Airbnb is that its revenue of $5.99 billion in 2021 was well above the $4.8 billion it earned in 2019. So while the industry as a whole is n rebounded, Airbnb is more robust than before the outbreak.

Chart showing Airbnb revenue and net income rising then falling since 2021.

ABNB Revenues (Quarterly) given by Y-Charts

This can partly be attributed to Airbnb’s business model. It does not own any of the ads on its platform. Instead, it encourages transactions between those looking for accommodation and those with properties they want to rent out. As guest demand increases, hosts list more properties more often. The structure of the company allows the offer to adjust quickly, responding to market demand. This is in stark contrast to traditional hotels and resorts with little flexibility. If demand exceeds existing capacity, it will take time to erect structures with rooms to reserve.

And customer demand is increasing with spending up $340 billion in 2021 compared to 2020. Additionally, the industry is still $600 billion short of pre-pandemic levels, suggesting more pent-up demand could be unleashed over the next two years. Even if Airbnb does not achieve profitability in the first quarter, its prospects are excellent for the next few years.

What this could mean for Airbnb investors

Wall Street analysts expect Airbnb to post revenue of $1.45 billion and a loss per share of $0.28. If the company achieves these projections, it will represent increases of 63.8% and 85.6%, respectively, over the same period last year. Notably, it would also end its streak of two consecutive quarters of profit to bottom line.

Chart showing Airbnb's price to free cash flow falling sharply in mid-2021.

ABNB Price vs. Free Cash Flow given by Y-Charts

Nevertheless, this should not discourage long-term investors to buy Airbnb Stock. Over the next few years, the company has excellent prospects as travel demand increases and stocks trade near their lowest level relative to free cash flow.

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