One day doesn’t make a trend, so it may be premature to get too excited. Nor does two for that matter. But could things be looking up for Airbnb (NASDAQ:ABNB) and its investors? Well, let’s look at the most recent developments in Airbnb stock. Then, we can formulate a risk-adjusted determination aligned with those findings.
Shares of very recent IPO and private stay hosting giant Airbnb jumped 10.57% Wednesday. And some follow-through Thursday has to feel like fresh bath towels after what had been a very chilly bath for shareholders . In the prior three sessions, ABNB stock sank 14%. And at their worst, the stock tumbled 26% from last Thursday’s all-time-high of $165 as it made its debut as a publicly-traded company.
So, what’s behind the bullish swing higher? Off the chart, investors are enjoying some reasons to cheer. Wednesday’s news of a $30 home testing kit for the novel coronavirus being approved offered a bit of relief. Covid-19, of course, has wreaked havoc in 2020 on Airbnb’s business model amid lockdowns. This is due to “is it as clean as the hotel?” concerns and other challenges from both would-be customers and its network of hosts.
Moreover, Airbnb’s investors are also likely cheering Congressional negotiations which are inching towards approval for a long-awaited new round of stimulus worth $900 billion. That’ll book a lot of extra stays, right? If nothing else, the combined reports did have the impact of sweeping a negative and well-heeded warning under the carpet.
Back to and behind that chilly bath Airbnb shares took, on Monday investment boutique Gordon Haskett cut the stock from “underperform” from “buy.” Gordon who? With more than three dozen underwriters handcuffed by post-IPO quiet period rules, the smaller outsider enjoyed a bit more influence than otherwise as it cited valuation concerns with Airbnb. The firm contends ABNB’s juiced up IPO and pricing relative to industry peers Booking Holdings (NASDAQ:BKNG) and Expedia (NASDAQ:EXPE) is problematic.
The firm went on to say, after ratcheting up its price target of $77 per share, that Airbnb should fetch $103 a share. But following Monday’s spill of 6.64%, still growing mess of 4% on Tuesday and fresh all-time-low of $121.50, Wednesday’s and Thursday’s mopping up, nevertheless, has a bit more cleaning power behind it than a cautionary warning of let the buyer beware.
Airbnb 60-Minute Price Chart
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Yes, Airbnb is expensive. There’s no denying that. But isn’t that always the case? And particularly so in today’s historically rich market?
Still, Gordon Haskett isn’t alone. InvestorPlace’s Dana Blankenhorn argues the stock’s $88 billion IPO priced at 25 times sales says it all. Dana also warns Airbnb is risky given potential regulatory threats by cities concerned about a glut of rental properties at the expense of residents. They aren’t the only people worried either.
Even Matt McCall, a guy that’s had his share of multi-baggers and knows that often you have to pay-to-play in cutting edge growth stories to capture those staggering returns, is concerned. And that’s despite consistently arguing this year our pre-2020 sense of normalcy and travel demand will return.
So, what then? Matt is slightly bothered the Covid-driven trend of people picking up their bags and moving out of urban centers. At a minimum, at current prices in the stock, that’s enough to give pause. The thing is that dynamic has pressured the outfit’s bread and butter rental markets where it profiteered handsomely from “scarcity value.” And without bearishly declaring the roof is going to come crashing down on Airbnb, conditions could still get uglier next year.
Thus, if investors are looking for the next Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN) or Facebook (NASDAQ:FB) with this IPO, waiting looks like a good idea. And that goes for the price chart as well. Well, other than the 60-minute chart, which could have bulls reasonably justifying a purchase.
Overall, with just a week’s worth of price information, that’s not a lot to hang one’s hat on. Still, if you’re insistent today is the day and don’t wish to give away the keys to the house to bearish intruders, I’d highly recommend a stock-based married put or collar strategy on Airbnb stock as money well-spent.
On the date of publication, Chris Tyler does not hold, directly or indirectly, positions in any securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
