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Airbnb (ABNB) Gains 7.8% YTD: How to Play the Stock Now?
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Airbnb (ABNB - Free Report) has seen its stock price climb 7.8% in the year-to-date period, underperforming the industry and S&P 500 index’s rise of 11.7% and 18.2%, respectively.
Greater volatility in travel demands due to macroeconomic uncertainties, foreign exchange headwinds and the impacts of geopolitical conflicts have been major concerns for the company.
Although Airbnb's brand is highly recognized around the world, rising competitive pressure from the two juggernauts of the online travel booking industry — Booking Holdings (BKNG - Free Report) and Expedia (EXPE - Free Report) — does not bode well for its market position. Listing and meta search websites like TripAdvisor (TRIP - Free Report) and Trivago are also strong rivals of ABNB.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Nevertheless, the modest gain in the stock reflects Airbnb’s resiliency despite the above-mentioned challenges. The company’s strong core business, strategic investments and expanding global footprint, which are driving growth in its Gross Booking Value (GBV), are major positives. Solid momentum in its marketplace, which connects hosts and guests online, and strong listings on its platform are helping it grow in urban and non-urban areas. It is worth mentioning that Airbnb has more than 7.7 million listings on its platform across 100,000 cities in almost every country and region across the globe.
In first-quarter 2024, GBV amounted to $22.9 billion, which rose 12% from the prior-year quarter’s reported figure. Growing gross nights booked, owing to the solid momentum across non-urban areas and increased demand for urban and cross-border travel, contributed well. Nights and Experiences Booked were 132.6 million, up 9.5% on a year-over-year basis.
Strategic Investments Aid Long-Term Prospects
Airbnb’s continuous investments in its key strengths bode well for its long-term prospects.
Strong investments to grow the size and quality of the host community remain noteworthy. The company is expanding use cases, and supporting various kinds of hosts (the ones who share their homes with guests) to attract more hosts globally to its platform. The move will help hosts to deliver high-quality stays and experiences for guests. Airbnb is also raising awareness around hosting in order to make it easier for hosts to get started.
In the last reported quarter, the company removed several listings that failed to meet guests' expectations. Excluding these listings, active listings, excluding experiences, grew 17% year over year, with double-digit supply growth across all regions.
Airbnb’s growing investments to strengthen its core services are positives. It has added more than 430 features and upgrades to its core service to make its platform more reliable and affordable for guests. The launch of Guest Favorites, a collection of the most-loved homes on Airbnb based on ratings, reviews and reliability data, is driving the company’s momentum among various guests. It has witnessed more than 100 million nights booked at Guest Favorites listings since the launch.
The recent launch of a label feature, which ranks the top listed properties with a badge, is a plus. The feature allows customers to choose from a wide range of properties.
Airbnb is deepening its focus on international expansion. It is investing in under-penetrated or less mature international markets to unlock growth opportunities. The company has witnessed strong results from this strategy. In first-quarter 2024, growth in gross nights booked in these markets was more than double the core markets.
It intends to expand its global network and partner with communities to help more hosts join its platform.
Airbnb introduced a category of extraordinary experiences called "Icons," hosted by celebrated personalities in music, film, TV and sports. This is helping common people to understand the experience that ABNB offers.
As of Mar 31, 2024, cash and short-term investments amounted to $11.1 billion compared with its long-term debt of $1.99 billion. The company also generated net cash of $1.92 billion from operating activities and a free cash flow of $1.91 billion in first-quarter 2024.
A stable balance sheet and strong liquidity position will not only help the company pursue strategic acquisitions but will also enable it to repurchase shares. The company repurchased $750 million of its shares in the same quarter.
In February 2024, Airbnb announced a share repurchase authorization to purchase up to $6 billion of its Class A common stock.
Conclusion
Airbnb’s strong investments to deliver enhanced experience to both host and guest communities are expected to drive growth in its GBV and contribute well to its top-line growth in the long run.
The Zacks Consensus Estimate for the company’s 2024 GBV is pegged at $81.99 billion, indicating year-over-year growth of 11.8%. The consensus mark for 2024 Nights and Experiences Booked stands at 493.34 million, suggesting a year-over-year rise of 10.1%.
The Zacks Consensus Estimate for 2024 revenues is pegged at $11.25 billion, indicating a year-over-year increase of 13.4%.
However, macroeconomic headwinds, seasonal impacts and rising competition are making investors bearish about the stock. This is evident from the downward revision in earnings estimates.
The consensus mark for 2024 earnings is pegged at $4.65 per share, which has moved 0.2% south over the past 30 days.
Image Source: Zacks Investment Research
Moreover, Airbnb is currently trading at a premium with a forward 12-month P/E of 29.21X compared with the industry’s 24.32X, reflecting a stretched valuation.
Image: Bigstock
Airbnb (ABNB) Gains 7.8% YTD: How to Play the Stock Now?
Airbnb (ABNB - Free Report) has seen its stock price climb 7.8% in the year-to-date period, underperforming the industry and S&P 500 index’s rise of 11.7% and 18.2%, respectively.
Greater volatility in travel demands due to macroeconomic uncertainties, foreign exchange headwinds and the impacts of geopolitical conflicts have been major concerns for the company.
Although Airbnb's brand is highly recognized around the world, rising competitive pressure from the two juggernauts of the online travel booking industry — Booking Holdings (BKNG - Free Report) and Expedia (EXPE - Free Report) — does not bode well for its market position. Listing and meta search websites like TripAdvisor (TRIP - Free Report) and Trivago are also strong rivals of ABNB.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Nevertheless, the modest gain in the stock reflects Airbnb’s resiliency despite the above-mentioned challenges. The company’s strong core business, strategic investments and expanding global footprint, which are driving growth in its Gross Booking Value (GBV), are major positives. Solid momentum in its marketplace, which connects hosts and guests online, and strong listings on its platform are helping it grow in urban and non-urban areas. It is worth mentioning that Airbnb has more than 7.7 million listings on its platform across 100,000 cities in almost every country and region across the globe.
In first-quarter 2024, GBV amounted to $22.9 billion, which rose 12% from the prior-year quarter’s reported figure. Growing gross nights booked, owing to the solid momentum across non-urban areas and increased demand for urban and cross-border travel, contributed well. Nights and Experiences Booked were 132.6 million, up 9.5% on a year-over-year basis.
Strategic Investments Aid Long-Term Prospects
Airbnb’s continuous investments in its key strengths bode well for its long-term prospects.
Strong investments to grow the size and quality of the host community remain noteworthy. The company is expanding use cases, and supporting various kinds of hosts (the ones who share their homes with guests) to attract more hosts globally to its platform. The move will help hosts to deliver high-quality stays and experiences for guests. Airbnb is also raising awareness around hosting in order to make it easier for hosts to get started.
In the last reported quarter, the company removed several listings that failed to meet guests' expectations. Excluding these listings, active listings, excluding experiences, grew 17% year over year, with double-digit supply growth across all regions.
Airbnb’s growing investments to strengthen its core services are positives. It has added more than 430 features and upgrades to its core service to make its platform more reliable and affordable for guests. The launch of Guest Favorites, a collection of the most-loved homes on Airbnb based on ratings, reviews and reliability data, is driving the company’s momentum among various guests. It has witnessed more than 100 million nights booked at Guest Favorites listings since the launch.
The recent launch of a label feature, which ranks the top listed properties with a badge, is a plus. The feature allows customers to choose from a wide range of properties.
Airbnb is deepening its focus on international expansion. It is investing in under-penetrated or less mature international markets to unlock growth opportunities. The company has witnessed strong results from this strategy. In first-quarter 2024, growth in gross nights booked in these markets was more than double the core markets.
It intends to expand its global network and partner with communities to help more hosts join its platform.
Airbnb introduced a category of extraordinary experiences called "Icons," hosted by celebrated personalities in music, film, TV and sports. This is helping common people to understand the experience that ABNB offers.
Solid Liquidity Supports Shareholder-Friendly Initiative
As of Mar 31, 2024, cash and short-term investments amounted to $11.1 billion compared with its long-term debt of $1.99 billion. The company also generated net cash of $1.92 billion from operating activities and a free cash flow of $1.91 billion in first-quarter 2024.
A stable balance sheet and strong liquidity position will not only help the company pursue strategic acquisitions but will also enable it to repurchase shares. The company repurchased $750 million of its shares in the same quarter.
In February 2024, Airbnb announced a share repurchase authorization to purchase up to $6 billion of its Class A common stock.
Conclusion
Airbnb’s strong investments to deliver enhanced experience to both host and guest communities are expected to drive growth in its GBV and contribute well to its top-line growth in the long run.
The Zacks Consensus Estimate for the company’s 2024 GBV is pegged at $81.99 billion, indicating year-over-year growth of 11.8%. The consensus mark for 2024 Nights and Experiences Booked stands at 493.34 million, suggesting a year-over-year rise of 10.1%.
The Zacks Consensus Estimate for 2024 revenues is pegged at $11.25 billion, indicating a year-over-year increase of 13.4%.
However, macroeconomic headwinds, seasonal impacts and rising competition are making investors bearish about the stock. This is evident from the downward revision in earnings estimates.
The consensus mark for 2024 earnings is pegged at $4.65 per share, which has moved 0.2% south over the past 30 days.
Image Source: Zacks Investment Research
Moreover, Airbnb is currently trading at a premium with a forward 12-month P/E of 29.21X compared with the industry’s 24.32X, reflecting a stretched valuation.
Image Source: Zacks Investment Research
Hence, investors should wait for a better entry point for Airbnb, which currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.