Most investors and consumers are well-aware of Airbnb’s (ABNB) ever-expanding brand. Its listing platform has grown to 4 million hosts who have welcomed over 1 billion guest arrivals to about 100,000 cities across the world.
With hosts on Airbnb being everyday people who list their properties, the platform is known for its hospitality qualities often not experienced through traditional hotels.
In my view, the hotel industry is going out of fashion, and travelers’ interest to stay in unique locations of every kind, including bungalows, boathouses, huts, and other special residences, is growing. This makes for a great tailwind for Airbnb’s long-term success.
That said, with the pandemic persisting globally and international traveling still lagging, it’s quite uncertain when the company will start experiencing consistent growth. Hence, I am neutral on the stock.
Latest Developments
Lodging/hospitality were some of the most adversely hit industries during the initial stages of the pandemic, whipping Airbnb’s growth trajectory. While hopes for the pandemic to ease through 2022 were high last year, this doesn’t appear to be occurring.
The company’s latest results showed impressive growth metrics, but there are two things to take into account. Firstly, they compare to 2020’s depressed results, hence the improvements are based on beaten-down numbers. Secondly, the pandemic has become increasingly more worrisome over the past quarter, hence Airbnb’s upcoming earnings going forward may not pick up from Q3’s advancements.
In any case, Airbnb reported revenues of $2.2 billion in Q3 2021, 67% higher year-over-year. The company also recorded a net profit of $834 million during the period, suggesting a 280% growth versus the comparable period last year. This was due to the company’s continued expense discipline, and recovered revenues (margin expansion).
The travel rebound that started during the spring of last year accelerated in Q3, resulting in Airbnb’s strongest quarter ever. In fact, revenues and net income were the company’s highest ever. Adjusted EBITDA surpassed $1 billion, also Airbnb’s highest ever. Further, host earnings reached a record $12.8 billion in the quarter, while active listings continued to increase.
Growth was driven by higher booking volumes. Healthy recovery in Nights and Experiences Booked combined with quite higher Average Daily Rates pushed nearly $12 billion of bookings during the quarter. This suggests a great increase compared to a year ago (48% higher), during the depths of the COVID crisis, as well as the same pre-COVID period (36% higher from Q3 2019).
Then again, I insist that investors should lower their expectations going forward, as uncertainty surrounding international traveling has only risen since.
Wall Street’s Take
Turning to Wall Street, Airbnb has a Moderate Buy consensus rating, based on 10 Buys, 15 Holds, and one Sell assigned in the past three months. At $195.44, the average Airbnb stock projections imply 19.2% upside potential.
Conclusion
Airbnb has definitely shown solid improvements from the adverse effects it had experienced in the midst of the pandemic’s early expansion phase. That said, I remain wary of Airbnb’s short-term results, as international travel restrictions and concerns seem to be re-emerging.
Download the TipRanks mobile app now
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Read full Disclaimer & Disclosure
