It’s been a tough year for the vacation rental giant Airbnb (ABNB 3.13%). The general bear market and growing pessimism about the future of travel spending has sent the stock down 49% year-to-date.
As 2022 draws to a close, many investors are wondering if Airbnb will fall further in the new year or is heading for a recovery in 2023. Let’s take a closer look and see.
Focus on Airbnb today
Airbnb is the world’s largest vacation rental listings platform with over 4 million hosts offering short and long-term stays in virtually every country. Despite the battered share price, the home-sharing platform has had one of its best years. The return of travel in 2021 and 2022 has helped its revenue, earnings before interest, taxes, depreciation and amortization (EBITDA), and net income is growing in double digits year over year.
Many investors feared its massive growth would come to an abrupt halt as consumers slowed spending. After all, travel is often one of the first things people cut back on if budgets get tight. But travel spending remains high. By the third quarter of 2022, nightly bookings were up 25% from a year earlier, and holiday travel in 2022 is expected to reach pre-pandemic levels.
Many young start-ups like Airbnb are not profitable in the first years. But Airbnb is already extremely profitable. The company has developed its free movement of capital by 519% since its IPO while developing operating margins by 138%. That puts the company in a strong position to maintain healthy growth in 2023 and beyond, but that doesn’t mean its share price will reflect that.
2023 could be a mixed bag
The stock is down about 50% since the start of the year through no fault of its own. In fact, the company has repeatedly exceeded earnings estimates and delivered absolutely stellar growth for shareholders. But general investor sentiment about the outlook for the economy and markets often drives stock price action more than actual company performance. This means that 2023 could be another tough year for Airbnb if recession worries persist or if a recession actually ensues.
The Motley Fool takes a long-term approach to investing, recommending investors buy and hold stocks for five years or more. Airbnb is no exception to this rule. The stock could have a tough year aheadbut if one thinks long-term about the future of this vacation rental platform, then a recovery seems inevitable.
He has plenty of cash to cover his operations in the near future; even if a recession were to have a negative impact on travel spending. It is also releasing new features like Airbnb and AirCover categories to promote its listings and get more bookings. New strategies for attracting and retaining customers should help it maintain revenue and long-term growth.
Airbnb is also benefiting from a growing number of long-term tenants on the platform thanks to remote working. In the third quarter of 2022, stays of more than one month represented around 20% of its reservations. These bookings would probably not stop in the event of a recession.
Right now, it’s trading around 27 times its forward earnings, which is a bargain compared to the others. high growth technology stockswho have price/earnings ratios ranging from 30 times to 220 times their future earnings. Personally, I believe that the current low share price provides an excellent opportunity to buy this high growth stock. Stay patient with its share price recovery timeline. If all goes well for Airbnb, this could entice investors a fortune over the next decade.
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