3 reasons to love this resilient stock
Like many travel documents, Airbnb (NASDAQ: ABNB) had a tough run in 2020. Nonetheless, the company decided to go public at the end of last year, and shares have jumped more than 200% from the original offering price over the past three years. first months of negotiation. The stock fell recently, down nearly 25% from its all-time high.
Airbnb is experiencing phenomenal growth from 2020, but some investors fear this year’s success will not last. While near-term results are uncertain, the company’s long-term growth potential indicates dominance in the travel industry through three competitive advantages.
1. Unparalleled uniqueness
Have you ever gone to your typical hotel website to find a yurt or treehouse to live in while on vacation? The chances are slim, but on Airbnb, one-time stays are commonplace. You can even spend the night in a dome in Maine if you wish. The company is able to offer these unique experiences due to the emphasis on guest satisfaction.
Airbnb says “Hosts will be the center of Airbnb” because they are the foundation of the company’s platform. To attract hosts, the company tries to make its service simple and easy to use. In the most recent letter to shareholders, Airbnb said: “[W]We saw the time to complete an Airbnb listing drop by more than half for the majority of new hosts, ”thanks to new tools and resources rolled out in the second quarter.
Management also saw growth in the number of active listings on its platform during the quarter, in part driven by a sequential 8% increase in “active listings in non-urban destinations in Europe and North America.” . As clear evidence of the company’s ongoing recovery, nights and booked experiences increased 197% year-over-year to 83.1 million (this figure was stable from Q2 2019). ). Airbnb expects this metric to be volatile going forward, but the company would only need to increase the number of nights and experiences booked by an additional 3.4% from last quarter to establish a new corporate record.
2. The place to be for long stays
Airbnb is also successful in another category of travel: long-term stays. About one in five nights booked in the second quarter was from long-term stays, which the company defines as 28 days or more. And 50% of the nights booked were for stays of seven days or more. Due to COVID-19, many people working remotely have decided to venture out of their home offices, and they are looking for exciting new places to work – and live – for weeks or months at a time.
The company expects this trend to continue: 81% of Airbnb users who booked extended stays in the second quarter said they plan to do so again next year .
3. Strong financial resilience
Airbnb has also shown financial strength during the pandemic. Now he’s on the verge of hitting a new all-time high on his top line. Second quarter revenue increased 10% to $ 1.33 billion from the same quarter in 2019. Reserve assets – another leader in the online travel space – has not been as successful. Its second quarter sales are down 44% over two years.
For its near-term guidance, management said in the letter to shareholders: “As the COVID-19 pandemic creates continued uncertainty for our future results, we expect third quarter 2021 revenue to be our most significant quarterly revenue. highest ever and will generate the highest adjusted EBITDA dollars. and the margin ever. “
Airbnb was also able to increase its average booking value per night, which rose 38% from the second quarter of 2019 to $ 161.45. Its unearned fee – the income of consumers who have already booked travel and paid but have not yet checked in – also rose, up 41% to $ 1.48 billion in the same period. The company isn’t always profitable – it lost $ 1.27 billion in the first half of this year – but it also generated $ 1.27 billion in free cash flow.
Expectations are high
The main concern for investors is valuation: Airbnb is trading at 23.2 times sales. Compared to Booking – which trades at just 14.1 times sales – the market has much higher expectations for Airbnb.
So while the company expects highs and lows over the next few quarters due to pandemic uncertainty, the stock is also likely to experience volatility in the future. But Airbnb has stood out in the travel industry with the most popular platform for home sharing experiences, and this leadership position can help support its long-term growth.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.