There’s a new king in the travel market and it’s ABNB stock.
AirBnB (NASDAQ:ABNB) opened for trade Apr. 5 at almost $191/share. That’s a market cap of $114.5 billion, on 2020 revenue of $3.4 billion or (if you’re an optimist) 2019 revenue of $4.8 billion. That brings ABNB stock price to sales ratio of anywhere from 23 (for the optimists) to 34 (for the realists). We can’t talk about a price to earnings ratio because there are no earnings, and there never have been.
ABNB stock is the most valuable name in travel. Booking.Com (NASDAQ:BKNG), which began as Priceline, is worth $97.6 billion. It had $15 billion in 2019 revenue and brought nearly one-third of that revenue to the net income line. Expedia Group (NASDAQ:EXPE) is worth $25.3 billion on 2019 revenue of $12 billion.
A Ridiculous Price
It’s a ridiculous price but you would never know at Tipranks, where 10 of 26 analysts rate AirBnB a buy and only 1 says sell. The average one-year price target, however, is $193.25, 2% from where it was due to open.
Bulls like the folks at Revolution Capital say they love AirBnB because travel should be a $1 trillion market in 2025. Revolution thinks AirBnB will hit $13 billion in revenue by 2025, based on its current trajectory. They believe its “experiences” service should be a big growth catalyst.
Sure, but you’re buying at over 10 times expected 2025 revenue. Let’s also not forget that, as with other stocks that find a better business model like Tesla (NASDAQ:TSLA), the posse is now after ABNB stock. Expedia has a version of AirBnB called Vrbo, which is seeking to poach hosts. Booking offers a version of AirBnB. TripAdvisor (NASDAQ:TRIP) has offered experiences for years — that is its core business.
The companies that book travel are also bigger than anyone else in travel. AirBnB now has more than twice the market cap of Marriott International (NYSE:MAR), almost three times that of Southwest Airlines (NYSE:LUV), more than three times that of Carnival (NYSE:CCL).
That’s not to say AirBnB isn’t a good company. It should see great growth in 2021. Its “experiences” helped many gig workers through the pandemic.
The company has launched a splashy new ad campaign for hosts, shutting down its online “influencers” program, while its rivals continue to market mostly online.
But have we already forgotten the pushback AirBnB was getting two years ago? Those fights are back. As our Muslim Farooque notes many cities are banning the service or putting such constraints on it as to practically shut it down. Cities that tourists like are doing all they can to discourage AirBnB hosts with strict regulation.
Then there’s the AirBnB “myth” that when you rent with them, some small guy like you is getting the money. Not true. Just 5% of hosts control one-third of all AirBnB rentals. The business of hosting AirBnB is becoming as corporate as hotels.
The Bottom Line
A lot of savvy investors are now waiting for a big “AirBnB dip” before they buy.
I suspect they’re going to get one.
AirBnB is a great company, and I have used the service with some success. But the secret to its success is out. The assumption that it will continue to take huge market share from every rival, even after those rivals copy its model, seems off-base.
I don’t like to go short. If I did, I would limit my exposure with options, maybe 3-6 months out. If I were of a mind to do that, this is one of the stocks I would short. The rent’s too high.
At the time of publication, Dana Blankenhorn owned no shares, directly or indirectly, in stocks mentioned in this story.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at firstname.lastname@example.org, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.