Airbnb Is A Great Travel Recovery Play 

Advertisement

One of the largest lodging companies in the world, Airbnb (NASDAQ:ABNB) stock is a popular name in the hospitality industry.

Airbnb (ABNB) app on a smartphone screen
Source: BigTunaOnline / Shutterstock.com

Despite not owning a single property, it offers an ideal solution to travelers across the globe. It is a platform that connects hosts with guests. Although the timing of the company’s IPO was not ideal, it raised $3.5 billion and exceeded expectations.

ABNB stock jumped about 113% on the first day of trading and hit an all-time high of $219 early this year.

But the stock has shown volatility recently. Since April, the stock has gone from $188 to $132 today. 

I have faith in the business model of Airbnb and I strongly believe that there is massive growth opportunity as the world reopens and travel resumes. It offers an ideal alternative to traditional hotel rooms and has a strong presence across the globe. With that in mind, let’s take a look at the catalysts driving ABNB stock higher.

Strong Fundamentals

Airbnb recently reported Q1 results and its revenue stood at $887 million, which is a 5% increase from the previous year. Despite the pandemic and travel ban across nations, the company managed to increase revenue by 5%.

The company reported net losses of $1.2 billion, which was better than analysts expected. Free cash flow stood at $486 million as compared to the negative $586 million expected by analysts. In addition, ABNB said 24% of stays book on its site were for 28 days or longer, which shows the willingness of travelers to enjoy longer stays at properties.

After spending most of the past year indoors and dealing with many coronavirus challenges, all of us are desperate to take a holiday and this is a factor that will favor Airbnb. The company has an edge in the online market holiday rental space and has become a dominant player. Travelers trust Airbnb for their holidays and the company has positioned itself as a powerful brand. 

There was a total of 64.4 million nights on Airbnb in the first quarter, with a booking value was $10.3 billion. The company expects Q2 revenues to show more improvement and with positive momentum of recovery, revenues and bookings should surge in the coming quarters.

Wall Street Loves ABNB Stock

Analyst estimates towards ABNB stock are positive. 

Needham & Company analyst Bernie McTernan praised the quarterly results of the company on the recovery in demand for holidays. The analyst had a buy rating for the stock with a price target of $194.

Further, Justin Post from Bank of America had a price target of $190 with a neutral rating. The analyst cited that the results show three positives for this year, strong recovery ahead of the rest of travel, strong cost leverage, and strong traffic considering the high demand. 

Out of 31 analysts on Tipranks, 13 have a buy rating and 17 have a hold rating with an average price target of $181 which is a 28% upside from the current level. 

The Bottom Line 

With the rollout of vaccine and lifting of travel restrictions, Airbnb is ready to welcome guests and churn out a higher revenue. Families have already begun to pursue domestic travel and prefer long-term stays. The pandemic has led to a shift in travel preferences and travelers find independent properties to be safer and reliable as compared to hotels. 

The lock-up period ended May 17 so we could see some volatility in coming days. The lockup period is when insiders are not allowed to sell the stock. 

However, any dip is a great opportunity to buy. ABNB stock could be soaring to new highs this year. Once the travel industry picks up, there is no looking back for this company. 

In short, ABNB stock is one to own for the long term. 

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.


Article printed from InvestorPlace Media, https://investorplace.com/2021/05/abnb-stock-airbnb-is-a-great-travel-recovery-play/.

©2024 InvestorPlace Media, LLC