Can Airbnb (ABNB) maintain its lofty valuation? That’s a question we’ve been asking for some time. During the recent tech selloff, it would seem that the market has provided the answer. Airbnb shares have lost almost 20% over the past week and has seen its value decline more than 35% since reaching a 52-week high of $220 in February. Is now a good time to buy?
The company, which pioneered the home-sharing market, will report first quarter fiscal 2021 earnings results after the closing bell Thursday. When assessing the attractiveness of the stock price, the market is eager to know whether it’s time to take a permanent vacation from its shares. Some analysts believe the shares, which are still some 110% above their IPO price of $68, could have further to fall. That’s in part due to the fact that even after the recent pullback, Airbnb stock still trades higher than those of the four largest hotel chains combined — a list that includes leading brands such as Hyatt Hotels (H), Hilton Hotels (HLT) and Marriott (MAR).
What’s more, Airbnb still commands the title as the world’s largest online travel company by market value, well above Expedia (EXPE) and TripAdvisor (TRIP). Without question, the company has established a globally recognized brand with a unique value proposition. The company’s platform gives it the sort of flexibility on both the supply and demand side that creates a strong competitive advantages over existing hotel operators. What’s more, when anticipating the incoming surge in travel demand, Airbnb's flexible business model puts it in a unique position to capitalize.
All of the above is known. The question is whether Airbnb can dominate e-travel for years to come. What will happen to the stock in the near term, particularly as its post-IPO lockup period is approaching sometime in the second quarter? Significant insider selling may occur. To offset these risks, investors will want to hear revenue growth assurances and upside guidance as a result of accelerated vaccine distribution.
For the three months that ended March, Wall Street analysts expects the San Francisco, Calif.-based company to lose $1.17 per share on revenue of $711.44 million. This compares to the previous quarter when it lost $11.24 per share on revenue of $859.26 million. For the full year, ending December, the loss is projected to be $1.64 per share, up from $15.63 a year ago, while full year revenue of $4.78 billion would rise 41.5% year over year.
After netting one of the biggest first-day rallies on record during its IPO, rising 113% to reach valuation of more than $100 billion, early-round investors aren’t complaining, even amid this current pullback, especially when considering only Alibaba (BABA) and Facebook (FB) ended their first day of trading with a higher valuation. But the pandemic has impacted the company’s fundamentals to such an extent that 2020 revenues declined 30% from $4.8 billion to $3.4 billion, including 22% decline in the fourth quarter.
On Thursday, investors will want to hear a more confident tone from management about the prospects of the travel industry in 2021 as vaccine distribution accelerates across the United States and worldwide. While the company has established a globally recognized brand, analysts will focus on guidance for gross booking and free cash flow, which will underscore the company’s cash generation potential.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.