Airbnb (ABNB), a vacation rental company, forecasted second-quarter revenue above market expectations this week. There is significant optimism that the company will have strong summer thanks to pent-up travel demand. Some investors may be wondering if this is the right time to buy the stock, given that a hybrid working environment will continue to encourage people to book rooms for a more extended period of time.
The San Francisco-based firm reported that it expects its revenue for the current quarter to be between $2.03 billion and $2.13 billion, which was much higher than Wall Street's estimate of $1.96 billion. The company reported its revenue of $1.51 billion against the estimate of $1.45 billion, a 70% increase on a y/y basis. Its gross booking value was $17.2 billion, and adjusted Ebitda was $229 million. In terms of loss per share, it reported a loss of 3 cents versus $1.95 y/y. Airbnb also beat its gross booking value per night: actual $168, while the estimate was for $163.
What Do Analysts Think of Airbnb?
Barclays has an equal-weight rating on the stock and trimmed its price target to $170 from $185. The bank was impressed by its 1Q beat and said that the beat was mainly driven by higher growth in nights booked and the average daily rate (ADR). The bank is still cautious because the APAC region is still under covid-19 restrictions. However, the bank believes that the company is well-positioned to gain more market share.
Jefferies has a buy rating on the stock; it has applauded the fact that Airbnb has been able to beat its earnings for the 6th consecutive quarter and echoes Barclay's point of view that impressive ADR drives strong growth. It believes Airbnb will continue to gain more market share.
RBC has a sector perform rating on the stock and called its earnings result as a "clean beat." It applauded its financial year margin guidance. Although the bank believes it is positioned well among its competitors, they have erred on the side of caution because of its current rich valuation.
What Now for Airbnb?
In my opinion, there is no doubt that Airbnb is positioned well in the hospitality sector and this is primarily due to two reasons.
Firstly, covid has made a hybrid working environment a reality. At the beginning of the pandemic, the company suffered significantly like all other hospitality firms, but now the landscape for Airbnb looks much more promising. Employees and business entrepreneurs can work from a remote location, which has always been desirable because of a better quality of life. For Airbnb, this will translate into a long-term opportunity that isn't only good news for the current quarter but also for its future quarters. In addition, Airbnb is positioned well among its competitors as its rent per night rate, on average, is cheaper than hotels.
Moreover, hybrid working and low cost are likely to result in a longer booking periods for the company.
The second reason that Airbnb's stock price is likely to see more interest is that summer is on our doorsteps. Travelers have spent a long time inside their houses due to strict covid restrictions, and this summer is the actual holiday season with covid-related restrictions at their lowest level.
Another thing to consider is that inflation in the U.S. and around the world is at its highest level in several decades, and this means travelers have limited funds at their disposal, meaning that they are likely to favor budget-friendly options like Airbnb over more expensive hotels.
Although most of the fundamentals point out that Airbnb is likely to have a more stellar quarter, APAC regions haven't fully returned to a pre-covid travel environment, which could be a headwind for the company.
To conclude, a hybrid working environment is likely to boost longer period bookings and ADR for Airbnb. This makes its stock price attractive. In addition, higher inflation will support Airbnb because travelers will focus on cheaper options. These fundamentals are likely to boost the company's stock price.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Naeem Aslam
I am a former Hedge Fund Trader with over 15 years of experience in investment banking. During my early career, I was awarded a national award (Young Irish Broker) in 2010. Over the years, I have worked with Bank of America in equity trading and with Bank of New York in hedge fund trading. I specialize in Blockchain technologies (cryptocurrencies and digital assets) and Sustainable Investments. In my career thus far, I have also extensively covered Equities, Commodities and Forex.
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