As an investor, it may be tempting to avoid Airbnb (NASDAQ:ABNB) because the share price seems expensive. And there’s no denying that ABNB stock has risen far above its initial public offering (IPO) price.
Yet, I feel it’s important for investors to distinguish between expensive and overvalued. When a company provides strong value, a lofty share price could be justifiable.
On the other hand, it’s debatable whether a travel hosting platform like Airbnb can thrive when the Covid-19 pandemic is still happening.
Perhaps we can construct an argument that there’s hope for a turnaround in the travel market. Moreover, a potent partnership with Visa (NYSE:V) ought to bolster the bull case for Airbnb.
A Closer Look at ABNB Stock
Let’s rewind to December, 2020. That’s when one of the most anticipated IPOs of the year was taking place.
In the lead-up to the Airbnb IPO, the expected price range for the stock was set at $44 to $50, and then raised to the $56 to $60 range.
Then, Airbnb sold more than 51 million Class A shares at $68 apiece. But as usual, the retail traders got the short end of the stick.
In reality, the vast majority of them never had the chance to buy ABNB stock at $68 — not even close. As it turned out, the stock actually opened for public trading at $146.
If you think that $146 is pricey, then this might shock you. By Feb. 11, 2021, Airbnb shares reached a 52-week high of $219.94.
In hindsight, it’s evident that this rally was too much, too fast. Thus, ABNB stock retraced to $172.71 by the end of April.
So, should we consider the stock to be expensive or a bargain? Among other considerations, it depends on whether you believe there’s a strong future for the travel market.
A Perfect Reopening Trade
San Francisco-based Airbnb is primarily a travel hosting platform. It allows income-seeking folks to rent out part or all of their homes to people for short- or long-term stays.
That’s a great business model — or at least it was, until the onset of the novel coronavirus.
That cataclysmic event put a damper on Airbnb’s revenues, of course. Today, however, ABNB stock investors can anticipate the “reopening trade” playing out throughout 2021.
It won’t happen all at once, but travel restrictions will likely be lifted over time.
For instance, just recently it was reported that Americans who’ve been fully vaccinated against Covid-19 will be allowed to travel to the European Union in the summer.
Furthermore, the Centers for Disease Control and Prevention (CDC) recently declared that “people who are fully vaccinated with an FDA-authorized vaccine can travel safely within the United States.”
And importantly, New York is easing a number of the state’s domestic travel restrictions, including its quarantine requirement.
Partnering With a Payments Powerhouse
These gradual signs of easing travel restrictions are certainly helpful to Airbnb and its hosts and travelers. Naturally, they’re also a welcome development for the shareholders.
And speaking of welcome developments, Airbnb, in conjunction with payment processor Visa, just made it easier for some Airbnb hosts to use their earnings.
In select markets, Airbnb hosts will easily be able to move money from Airbnb to a bank account associated with an eligible Visa debit card.
They’ll be able to do this through Airbnb’s use of Visa Direct, which is Visa’s real-time push-payments platform.
As Visa Direct Senior Vice President and Global Head Ruben Salazar points out, facilitating the payment process for hosts should benefit the broader Airbnb ecosystem.
“Visa Direct capabilities on the Airbnb platform can help improve cashflow for Hosts, allowing them to focus on welcoming travelers eager to explore the world again,” Salazar explains.
The Bottom Line
After such a powerful post-IPO run-up, could ABNB stock possibly be considered a bargain?
It’s possible that Airbnb will benefit from the reopening trade, as well as a partnership with one of the world’s best-known payments processors.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.