Formed in 2007, San Francisco-based home-sharing network Airbnb (NASDAQ:ABNB) has been through a number of ups and downs. And as you would expect, the Covid-19 pandemic induced a down period for the company and for ABNB stock.
Without a doubt, the bears and skeptics will point to the Delta variant strain of Covid-19 as a challenge to Airbnb’s business.
They have a valid point, but this doesn’t mean that investors should just dump their ABNB stock. In fact, one Wall Street analyst has actually identified several reasons to lean bullish on Airbnb.
In the end, Airbnb could turn out to be the ultimate recovery trade – and a $200 price level for the stock may be attainable in the coming months.
A Closer Look at ABNB Stock
When it comes to ABNB stock, it appears that there was some share-price inflation happening from the outset.
Airbnb had at one time targeted an initial public offering (IPO) price between $44 and $50 per share. Later, the company raised the price to a range of $56 to $60.
In December 2020, ABNB stock opened for public trading on the Nasdaq Exchange at $146 and rocketed up to $165 on that first day. The stock closed at $144.71 for an eye-popping gain of 112.8%.
The all-important $200 level was breached in February 2021, but only briefly. On Feb. 11, the buyers managed to push the share price up to a peak of $219.94.
A multi-month decline then ensued. By mid-July, ABNB stock was down to the $138 area.
That’s what can happen when investors buy stocks after a massive run-up.
In any case, Airbnb’s shares have reached $200 or more. Are there positive catalysts at work which could send the stock price back to that level again?
If we’re to believe Gordon Haskett analyst Robert Mollins, there are definitely factors that could give Airbnb a boost.
Reportedly, Mollins was previously bearish on Airbnb, but just turned bullish. As evidence of this, the analyst upgraded ABNB stock from “underperform” to “buy.”
Not only that, but the analyst hiked his price target on the stock from $119 to $172.
He cited a number of reasons for changing his tune on Airbnb.
First, there’s data suggesting that global downloads of the Airbnb app have “materially improved” in recent months.
Also, Mollins noted that Covid-19 vaccination rates in Europe are quickly catching up to the rates observed in the U.S. Hopefully, that will help to mitigate the impact of the spread of the Delta variant strain.
Moreover, the analyst stated that as of the end of June, U.S. office occupancy was just 31% of pre-pandemic levels.
If companies are implementing a hybrid work model, U.S. consumers should be able to travel more frequently.
Changing for the Better
Mollins points are duly noted and should provide ammo for the bull thesis on Airbnb.
To all of that, I’d like to add other positive catalysts.
Specifically, Airbnb is reportedly implementing a number of changes that its customers and hosts will undoubtedly appreciate. These include:
- Launching a faster checkout process
- Updating its review systems in order to make them more user-friendly
- Making the cancellation policies clearer
- Allowing users to search for lodging at a given destination without a specific time frame
- Adjusting the search results to allow for more flexible listings and destinations
- Doubling the number of customer support representatives the company retains on staff
With these changes, happier customers and hosts should translate to an enhanced bottom line for Airbnb.
The Bottom Line
Mollins’ points, along with a more flexible platform, should provide powerful positive catalysts for Airbnb.
Will all of this be enough to propel ABNB stock back to $200?
It’s certainly possible, and the thesis is worth betting on with a long position in the stock.
On the date of publication, David Moadel 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.