After a month of peaks and valleys, Airbnb (NASDAQ:ABNB) stock is poised to resume its uptrend.
Markets are signaling a willingness to invest in the post-pandemic economy.
Recently, markets shifted away from technology stocks and toward airline- and tourism-related stocks.
The company’s strong earnings report bodes well for ABNB stock. Despite the travel restrictions last year, Airbnb posted promising fourth-quarter results. Investors have many positive takeaways from the report.
ABNB Stock on the Rise
Airbnb posted Q4 revenue falling 22.6% year-over-year to $859.26 million. It lost $11.24 a share on a GAAP basis. In its shareholder letter, the company said it is preparing for the travel rebound. As countries roll out the vaccine, Airbnb is perfecting its product and enhancing the end-to-end experience.
The better core service offerings for both hosts and guests will widen Airbnb’s competitive edge over hotel suppliers.
For example, hosts monetize their real estate by collecting rent. In return, it offers customers the convenience of a place to stay, often at costs lower than hotels. Airbnb guests may search for places to stay on the website. They have more locations to choose from, too.
ABNB becomes not only a top travel recovery play in the tourism sector but a long-term opportunity. The company appeals to a young demographic, suggesting years of upside revenue potential ahead.
Quick Rebound
Airbnb rebounded faster than the sector during the 2020 pandemic. Millions of guests wanted bookings that were closer to home.
When domestic travel rebounded faster than international, the company asserted the business model’s resiliency. That strength will accelerate the 2021 travel rebound play.
Airbnb’s main marketing message centers around who its customers travel with. It is less about where and when they go. So by centering its advertising and offers around the connections with people, ABNB shares have a strong upside ahead.
On Wall Street, some analysts rate ABNB stock a “buy,” but many more rate it a “hold.” By the time this indecisive group realizes how effective the vaccine is against Covid-19, Airbnb stock will already have taken off.
Investors need to get on board Airbnb before analyst upgrade their “hold” ratings to a “buy.”
ABNB Stock Presents an Opportunity
Airbnb’s strengthened balance sheet will give the company ample liquidity to fund its growth and operations. On March 2, the company offered a $2 billion convertible notes offering due 2026.
It will also use the proceeds to pay off existing debt. The lower costs for financing debt plus the renewed demand for travel are positive catalysts.
Valuations are still unfavorable and are a potential risk. The stock trades like a software company at around a 30 times price-to-sales multiple.
Still, the company is embracing solutions including artificial intelligence in its operations. For example, it developed AI to assess guests’ trustworthiness. It will continue to test advanced technologies to lower fraud, increase guest safety, and enhance the overall guest and host experiences.
Related Investments
Investors could buy hotel stocks like Hilton Worldwide (NYSE:HLT) instead, but since they rallied alongside the post-pandemic rebound play, the upside is potentially limited.
Expedia (NASDAQ:EXPE) also rallied in the last few months. It trades at favorable valuations compared to Airbnb. So, the alternatives are compelling if the market shuns ABNB valuations and bets on EXPE or Bookings (NASDAQ:BKNG) stock instead.
As more of the population gets vaccinated, the upside from the travel rebound trade will shrink. Airbnb’s leading platform and willingness to test creative solutions in its business model will assure its long-term growth ahead.
Disclosure: On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article.
