Some skeptics have pointed to San Francisco-based home-sharing network Airbnb (NASDAQ:ABNB) as a poster child of 2020’s initial public offering (IPO) mania. And it is true that the Airbnb stock IPO was surrounded by a lot of hype.
On the other hand, just because a company has a red-hot IPO, this doesn’t necessarily mean that investors should avoid the stock completely.
After all, Airbnb’s business model makes sense in a time when people are traveling again. The lockdowns induced by Covid-19 weren’t going to last forever, and the travel market is likely to exhibit signs of recovery in 2021.
While Airbnb stock hasn’t been trading on the public markets for very long, some prominent analysts are already warming up to it. Perhaps we can explore their various outlooks and come to our own conclusions on the future trajectory of this popular lodging-rental platform.
A Closer Look at Airbnb Stock
Prior to the IPO, the Airbnb stock price was already quickly moving upwards.
Airbnb had previously targeted an IPO price between $44 to $50 per share. Later, the company raised it to a range of $56 to $60 per share. So, even before the public had access to the shares, there was already some price inflation.
The stock opened for public trading on the Nasdaq Exchange at $146 and rocketed up to $165 on that day. The share price closed at $144.71, but that’s still a single-session gain of 112.8%.
After going sideways for a while, Airbnb stock ended 2020 at $146 and change. By Jan. 8, the stock landed very close to the $150 level (it’s hovering around $148 at this writing). So, it’s possible that the mania phase is in the rear-view mirror and a slow, steady ascent could be underway.
Getting Good Marks
When analysts weigh in on a stock, it’s kind of like a grading system in school. As far as Airbnb stock is concerned, it appears that the stock has already received good marks.
Since the stock is fairly new, 19 analysts recently initiated their coverage of Airbnb stock. So, here are the marks that the stock received. Six analysts rated the stock a “buy.” Plus, one analyst rated it as “overweight,” which is a positive rating.
Moreover, 12 analysts rated Airbnb stock as a “hold.” Therefore, it’s reasonable to say that the stock’s report card on Wall Street is quite good. None of the 19 analysts initiated their coverage with a “sell,” “underweight,” or similarly negative rating.
Sometimes you’ll see comments on a report card, and we can definitely find encouraging comments for Airbnb. For instance, D.A. Davidson analyst Tom White said that Airbnb has a $2 trillion-plus market opportunity. Additionally, a handful of analysts expect long-term revenue growth of 20% for Airbnb.
Why So Bullish?
The positive sentiment surrounding Airbnb stock is certainly encouraging. Yet, it’s important to know why the analysts are leaning bullish.
Raymond James analyst Aaron Kessler based his “positive fundamental view” partly on a total addressable market “a large nights and experiences [total addressable market] that is increasingly shifting to alternative accommodations.”
That’s an interesting take. I interpret it as a fancy way of saying that people are itching to travel but, frankly, hotels are too expensive.
White, meanwhile, underscored Airbnb’s ability to adjust to challenging circumstances. He wrote, “The pandemic continues to disrupt travel demand but has also highlighted the uniquely adaptable/resilient nature of Airbnb’s business.”
And here’s a completely different angle: “We like Airbnb’s ‘verb’ status,” writes Morgan Stanley analyst Brian Nowak. The implication, I suggest, is that Airbnb is so dominant in its niche that the company’s name is actually becoming part of the English language.
The Bottom Line
There are instances when the hype surrounding a stock may be justified. I feel that Airbnb stock may fall into that category.
I don’t suggest blindly following the recommendations of Wall Street analysts. Still, it’s worth noting the reasons for their bullish sentiment. In the case of Airbnb stock, some of those reasons are rather compelling.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
