Airbnb Stock Relies on the Optimism of the Other Guy

Perhaps no other initial public offering has yo-yoed as much as Airbnb (NASDAQ:ABNB) in terms of public sentiment. Airbnb stock had a Wilde IPO ride.

Woman holding mobile phone with the Airbnb logo on the screen

Source: Tero Vesalainen /

Essentially the Uber (NYSE:UBER) of the hospitality business, Airbnb allowed everyday folks to profit from their unused living space. Naturally, this disruptive model caught the ire of the professional lodgings industry. Still, this same disruption initially attracted investors to Airbnb stock.

But then, this little something called the novel coronavirus imposed its own brand of disruption. Ironically, it was more than strong enough to delay plans for Airbnb’s original IPO schedule.

As well, the pandemic delivered a body blow to the broader consumer market, leaving largely providers of essential goods and services to benefit. Indeed, during the early days of the crisis, it wasn’t out of the question to wonder if Airbnb stock was going to be dead on arrival.

Fortunately, the apocalyptic nightmare scenario didn’t come to pass (at least, not yet). Further, the online vacation rental services provider reported encouraging numbers for the third quarter, ringing up $1.34 billion in revenue.

True, this was down 18% from Q3 of last year. However, it was a huge step up from the $335 million in Q2, when the economy experienced the most devastation.

I’d be remiss not to point out that the company laid off 25% of its workforce in May. Additionally, it suspended marketing activities for the year and sought $2 billion in emergency funding from investors, according to a Reuters report.

No matter how you feel about Airbnb stock, you’ve got to admire the adaptability of the underlying management team. Rather than focusing on cities, the company instead followed the money, “listing homes away from cities that people want to rent during the pandemic.” That’s about a perfect of an example of when life gives you lemons, make lemonade.

Airbnb Stock Surrounded by Troubling Variables

Average daily Covid-19 cases vs. Airbnb revenue

Source: Chart by Josh Enomoto

If you’re feeling that the worst is behind us – and by deduction, Airbnb stock – some limited evidence does support that sentiment. Primarily, after new daily Covid-19 cases averaged over 220,000 cases (across a trailing one-week period), infections have thankfully come down in recent days.

On Dec. 27, the Centers for Disease Control and Prevention reported a week average under 181,000 cases. And new cases on that day were just under 146,000. Should this trend continue, it implies that hospitalizations and deaths will eventually fade to a “manageable” level. Later, public sentiment could recover, which of course would be a huge net positive for Airbnb stock.

But if I may, this pandemic has likewise yo-yoed. What may be an encouraging sign could succumb to yet another spike as people let their guard down. Further, the hard numbers give an ambiguous picture of what lies ahead.

In Q1, Airbnb reported $842 million in revenue. Of course, that was when Covid-19 was just starting to ripple throughout the country. At the time, daily cases averaged 2,654. But in Q2, infections skyrocketed, with the daily average increasing 10-fold to 26,809. Naturally, Airbnb sales plummeted to $335 million.

In Q3, though, the increase in average daily cases was “only” less than two-fold. Presumably, many people got used to the new normal. Combined with Airbnb’s focus on out-of-city dwellings, revenue increased substantially.

But now, we’re seeing almost a three-fold increase in average daily cases. Will people be used to the new normal that they’ll lift ABNB sales higher? I’m not so confident.

If that were to be the case, you’d expect people to be more willing to get out of the house. But according to data from the Bureau of Transportation Statistics, that’s not what you’re seeing. To be fair, December saw an uptick in holiday-related travel. However, we’re still talking about what amounts to a 50% haircut in demand.

That’s hurting airliners. You’d imagine that the pain will also spread downstream into lodgings, making Airbnb stock questionable, to say the least.

What About the New Covid-19 Strain?

As if you didn’t have enough things to consider if you’re a prospective buyer of Airbnb stock, you then must take into account the new Covid-19 strain that’s spreading across many parts of the world.

According to the CDC, there is evidence that a particular mutation of the virus has the property to spread more quickly. To be 100% clear, I’m not suggesting that we’re going to see a third wave of cases. I’m just someone reading between the lines. And one of those lines is that the Canadians have reported two cases of this new Covid-19 strain.

Given our proximity and how quickly the modern globalized economy transfers people to and fro, I’d say it’s a matter of time before we see a conspicuous spike of this new strain within our borders.

Hopefully, I’m wrong. But this tells you what you need to know about Airbnb stock. It’s based on a lot of hope that things go right in 2021. However, I’m not sure if too many people want to play that game.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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