Down 50% this year, are Airbnb shares still interesting?

Holiday sharing platform Airbnb Stock (NASDAQ
NDAQ
: ABNB) the stock has underperformed broader markets, falling around 9% in the past month while remaining down nearly 50% year-to-date. Although Airbnb’s recent quarterly results have been strong, with booking volumes and average prices rising on the company’s platform, the company’s growth rate is slowing. Additionally, Airbnb’s outlook for the holiday quarter was also weaker than expected, with revenue projected between $1.80 billion and $1.88 billion, marking an increase of approximately 20% from a year-on-year at the midpoint, compared to 78% growth during the year. – there is a period. Although this is partly due to forex headwinds, there is no doubt that the strong growth the company has witnessed is now behind it. Additionally, the broader travel industry is also expected to experience a slowdown in 2023 as economic headwinds intensify globally. Some notable brokerages also turned bearish on Airbnb shares, leading to additional selling pressure.

However, we think the stock looks quite attractive at current levels. Based on the current market price of around $87 per share, Airbnb is currently trading at around 6x forecast revenue for 2023, well below the 20x multiples it traded at its peak in 2021. The number falls to about 5x if we exclude the company’s net cash. approximately $8 billion. Moreover, Airbnb’s business also turns out to be rather profitable. Net profit reached a solid $1.2 billion during the third quarter of 2022, up 46% from a year ago. The company also generated $2.9 billion in free cash flow over the past nine months, which translates to a healthy free cash flow margin of 45%. Profitability metrics are likely to increase further due to better absorption of fixed costs, as the business can potentially grow its marketing spend at a slower rate than its revenue given its strong brand recognition.

Now there are also risks. There are also concerns about whether the company will be able to continue to recruit hosts with quality properties in sought-after locations in the future to support its booking growth. The broader global economy is also causing concern, making the travel and leisure sector somewhat vulnerable if people decide to cut discretionary spending further. That said, Airbnb’s asset-light model and lower rates compared to hotel rooms could prove to be a redeeming factor. We value Airbnb shares at around $125 per share. Our price estimate is about 40% higher than the current market price. See our interactive analysis on Airbnb Rating: expensive or cheap? for more details. View our dashboard at Airbnb revenue for an overview of Airbnb’s business model and likely revenue path.

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