From a scrappy BnB startup to a corporate heavyweight, Airbnb (NASDAQ:ABNB) finally made its much-anticipated IPO debut last week. The San Francisco-based company exploded in the markets at $146 a share, which was well above its IPO price of $68.
This propelled the company to a $100 billion valuation that left its own CEO speechless. Despite a hard year for the tourism industry, ABNB stock performance in the markets is a testament to the company’s resilience.
Its success also signals the imminent return of travel and tourism in 2021.
Where Is Airbnb Stock Headed After A Successful IPO
At its IPO debut on Dec. 10, Airbnb’s shares nearly doubled as the company raised $3.5 billion from investors. The home-sharing network sold 51 million shares at $68 a pop and the stock closed at $144.71. The 112.8% spike in its price pushed the company’s market capitalization to $100 billion. Airbnb’s IPO is said to be the third-largest market offering this year.
It’s been a spectacular year for companies on the IPO front. The food delivery service, Doordash (NYSE:DASH) made its IPO just before Airbnb, raising a total of $3.4 million. Insurance company Lemonade (NYSE:LMND) also made its market debut earlier and received an incredible response from investors.
Although 2020 was a bad year for many companies but the chain of successful IPOs hints at a strong recovery next year.
This is especially true for Airbnb that saw a major windfall even with its revenue down by 32% this year. However, if recent events provide any clues, the company is looking at a much stronger recovery in the next few months.
Adding to this is the pent-up demand for travel since the pandemic. With the worldwide rollout of the vaccine and the easing of restrictions, business and leisure travel will see tremendous growth. Companies like Expedia (NASDAQ:EXPE) and Booking Holdings (NADAQ:BKNG) are already up 220% and 90% since March.
The IPO serves as a pandemic lifeline for Airbnb and will help the home-sharing network kickstart its path towards recovery. Jim Cramer of CNBC believes that the company will see a strong rebound in the second half of the next year. Investors looking to make a play on this stock should get in now before it takes off.
Here’s Why Airbnb Will Succeed
Travel and tourism are undoubtedly some of the hardest-hit sectors of the pandemic but Airbnb’s unique service will help it thrive in the long haul. A number of trends that have taken shape as a result of the pandemic will help the home-sharing network sustain its growth levels in the coming years.
One, the pandemic has made remote work the norm for many companies (some have even made it a permanent option). This is because organizations that have managed to make the seamless transition to the home office find their employees to be more productive. The liberty to work from anywhere you please will result in employees taking long-term trips to different destinations. This will lead to a spike in demand for full-service Airbnb rentals worldwide.
In the era of social distancing, travelers are now looking for options that offer a more secluded stay at their destination. At the onset of the pandemic, Airbnb shifted gears to focus on its long-term rentals. This allows people to rent out full-service homes where they can socially distance and work for longer periods. Demand rebounded as more people opted to stay at individual homes over hotels when traveling.
Finally, it’s worth considering the demand for travel when the pandemic does end. The global tourism industry is worth billions and is set to grow in the next couple of decades. Airbnb’s unique offering in this thriving industry will set it up for success in the long-term. The company’s rentals and experiences are a huge pull for travelers who are looking to get back on the road or a plane again.
The home-sharing service has a lot going for it in the next couple of years, making ABNB stock a strong buy right now.
The Bottom Line
Airbnb’s high-powered IPO is just the start of what’s to come for the company. Its ability to sustain demand for shares in one of the toughest years for the tourism industry is a testament to the power of its business model. Although a short-term pullback is expected after its successful market debut, there is still a lot of upside for ABNB stock in the long-haul.
The future still remains uncertain as Covid cases continue to rise across the world. However, with the rollout of the vaccine next year and the eventual return of travel, Airbnb stock has nowhere to go but up.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.