Down 48%, this beat travel stock is a fantastic long-term hold

Airbnb (ABNB -1.42%) struggled at the start of the pandemic. Suddenly travel demand slowed dramatically. To make matters worse, people started canceling existing trips they had already booked on the platform. Unsurprisingly, Airbnb’s revenue fell 30% in 2020.

However, the company has bounced back – increasing revenue, increasing bookings and improving profits since then. Luckily for investors, Airbnb’s stock is down 48% from its highs, making it a great time to buy and hold for the long term.

Image source: Getty Images.

Airbnb bounces back stronger than ever

In its first-quarter letter to shareholders, Airbnb management noted that two years into the pandemic, Airbnb is significantly stronger than ever. The numbers support the claim. Revenue for the quarter ended March 31 was up 70% compared to the same quarter in 2021, but more importantly, it was 80% higher than the same quarter in 2019.

ABNB Income Table (Quarterly)

ABNB Revenues (Quarterly) given by Y-Charts.

Similarly, the gross value of bookings increased by 67% compared to the same quarter of the previous year and by 73% compared to the same quarter in 2019. With the pandemic far from over, it is impressive that Airbnb achieves such growth. As a reminder, Airbnb does not own the properties listed on its platform. Its mission is to connect hosts and travelers and to promote transactions between them. For its services, Airbnb takes a percentage of the gross value of the reservation.

This business model works in its favor because it is more flexible than traditional hotels and resorts. If Airbnb hosts see increased demand in their area, they can work to increase supply by listing their properties more often and even creating new listings. For example, hosts who typically rent out a spare bedroom in their home could convert the garage into a space they can list on Airbnb if the business is booming. This is precisely what is happening right now. Airbnb noted that supply is increasing in areas where demand is growing the fastest.

Additionally, the pandemic has created a new paradigm that could benefit Airbnb in the long run. Remote work has become much more common since the outbreak. If you’re not stuck in one place because you have to be close to the office, you can move around more often. Work from San Diego one month, Los Angeles another, and San Fransico after that. Tired of California? Work from Miami, then Orlando. Of course, this nomadic lifestyle is not for everyone, but many wish they had the freedom to choose. Indeed, Airbnb pointed out that long-term stays of 28 days or more are its fastest growing category, having more than doubled in size from the first quarter of 2019.

Airbnb’s outlook has improved and its price has fallen

Statement of Cash Flows from ABNB Operations (Quarterly)

ABNB Operating Cash (Quarterly) given by Y-Charts.

The rebound in travel and changes made by Airbnb at the start of the pandemic also improved profitability. For the first time in its history, Airbnb recorded positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). At $229 million in the first quarter of 2022, this is an improvement over the loss of Adjusted EBITDA of $59 million in the same quarter last year and the loss of $248 million in the measure in the first quarter of 2019. This trend boosted Airbnb’s operating cash flow, as shown in the table above.

Chart of ABNB Price to Free Cash Flow

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

Several metrics for Airbnb are going up, but down materially, and that’s its valuation. Despite its impressive outlook, shares of Airbnb have been overtaken by the market sell-off, which has created a great opportunity for investors to buy at near all-time lows.

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