Airbnb (NASDAQ:), the tech platform for booking alternative accommodation through non-hotel accommodations, seems like the perfect reopening stock. After a terrible pandemic year in which people were locked up and forced to take shelter, one might assume that the company and its stock are now perfectly positioned to take advantage of pent-up travel demand, with consumers more than ready to pack their bags and roam freely.
Before the pandemic, the non-hotel-like accommodations that Airbnb specializes in were already the fastest-growing segment of the travel market. Fortunately for shareholders, Airbnb in its latest release, released in mid-May, showed its company is making a quick comeback.
The San Francisco-based company, which went public in December, reported $10.3 billion in gross bookings in the three months ended March 31, up 52% ??from the same period a year earlier. Sales increased 5% to $887 million.
"Although conditions are not yet normal, they are improving, and we expect a travel recovery like we have not seen before," the company wrote in a cover letter to shareholders. last month's results.
Investors in the tourism industry seem to be getting ready for that wave. According to a recent report in Bloomberg, an organized group of investors are building huge portfolios of homes to rent on Airbnb. Dublin, Ohio-based ReAlpha – a real estate investment platform – is looking to spend a whopping $1.5 billion, including debt, to buy short-term rentals.
For Airbnb, the arrival of larger, more sophisticated investors could be a boon, even if it contradicts the company's efforts to market itself as a way for shoppers to discover new places. as local residents experience, the report said.
"Major investors are a potential source of new offerings and can offer a product that appeals to people who like the comfortable uniformity of hotels."
Stock lacks momentum
Yet Airbnb stocks lack momentum. Shares are up just 3% this year, while the benchmark gained about 12% over the same period. If anyone had invested in ABNB at the peak of February — when it hit a record high of $219.94 per share — current losses are over 30%. The stock closed Friday at $149.67.
A major factor keeping investors away is the current valuation of the stock, along with increasing competition after the pandemic. Online travel giants Booking Holdings (NASDAQ:) and Expedia Group (NASDAQ:), which own Vrbo, both launched aggressive marketing campaigns this year in an effort to rip hosts away from Airbnb. To counter it, Airbnb has initiated the biggest-ever makeover of its app since its inception, with more than 100 new features that promise to streamline the process for both guests and hosts. Analysts at RBC Capital Markets said in a recent note that Airbnb's valuation premium over competitors is justified "given its differentiated brand, clear category leadership, share earnings potential and increasing optionality over time". powder for booking travel," the note said. RBC has an outperform rating for the stock with a price target of $170. The note adds:
"Our audits of property managers suggest that equity gains lie ahead, and we believe the maturity of the offering is further away than investors realize."
Bottom Line
Airbnb stocks are trading significantly lower than their February peak, despite clear signs that short-term rental demand will be strong in the coming months. This revival in demand will help this newly listed company reduce its losses and give investors a good reason to buy its shares. The timing seems right to now take a position in one of the largest hospitality companies on the market. ]
