Airbnb (NASDAQ:ABNB) stock should have gotten a lot more juice after its recently-released Q2 2021 results beat expectations.
However, the continued challenges faced by the travel industry damped investor’s enthusiasm.
ABNB stock continues to consolidate at the range of $130 to $155. This is quite a fall from its all-time high of $217 reached two months after its IPO.
However, I believe this dip is a good opportunity for investors to consider accumulating ABNB stock.
Airbnb was a beneficiary of the release of pent-up travel demand in Q2 2021. As more people got vaccinated and travel restrictions lifted, Airbnb’s gross booking value in Q2 2021 exceeded pre-pandemic levels.
A Closer Look at ABNB Stock
Gross booking value was $13.4 billion in the quarter a 320% increase year over year. The company had revenue of $1.3 billion an increase of nearly 300% from 2020 lows and exceeded Q2 2019 by 10%.
The company had the highest ever gross nights booked in Q2 2021. As can be guessed, travelers from the US and parts of Europe were the primary drivers of the travel recovery.
This means that as more countries become vaccinated pent-up demand from those places will drive Airbnb’s revenues even further. This is fantastic news as it demonstrates the ability of the company to continue its growth trajectory once Covid subsides.
Airbnb is continually making strides in signing up hosts to increase supply to capture this growth in demand and has launched marketing campaigns as well as simplified the sign-up process for new hosts.
The company grew active listings in non-urban European and North American destinations by 8% year over year.
Airbnb Is Well Positioned for Post-Covid Travel
There has been a lot of news lately regarding the Delta variant of COVID and its potential to disrupt the lives of even the vaccinated.
Due to fears of this variant, re-opening and post-pandemic plans are being delayed. This can be seen in the slowdown of vacation-related travel bookings. Asian and European travel recovery has been difficult due to travel restraints and uneven vaccination rates between countries.
U.S. domestic travel was a bright spot. However, with the CDC starting to recommend masks indoors for the vaccinated, many people are thinking twice about making travel plans.
According to an analysis by Bank of America (NYSE:BAC) aggregate daily credit- and debit-card spending on airline tickets was 19% lower in July compared to 2019. All of this points to a short-term decline in the travel industry.
There is a strong underlying demand for travel which will benefit AirBnb in the long term. We already saw a strong surge in travel bookings as soon as restrictions were lifted.
This demand surprised even the most optimistic bullish forecasts. Navigating through the various restrictions is a reality now for many travelers. This is where AirBnb’s capabilities as a technology company shine through.
Airbnb’s new update leans heavily on “flexibility” easing the burdens of many travelers. The company rolled out a flexible date search feature that enables users to search based on the type of trip such as “long weekend” or “month-long trip.”
Flexible Matching and Flexible Destinations improve the number of options for travels by adding a bit of wiggle room to a specific search and unearthing unique properties regardless of location.
In other words, Airbnb is uniquely positioned to help travelers cope in a post-pandemic world.
Investor Takeaway
Like most high-growth technology firms, Airbnb has not yet reached profitability. The company improved its Net loss position in Q2 2021 to -$68 million.
However, the company’s Adjusted EBITDA of $217 million shows that the company is generating enough cash to sustain its operations. In 2019 AirBnb had revenues of $4.8 billion. At the current market cap of $94.6 billion, this implies a P/S ratio of 19.7x.
ABNB stock is not the cheapest stock in the travel industry and there still exists the risk of the delta variant. However, management has performed admirably in this difficult time.
I am confident that the company should be able to navigate any short-term difficulties. In the long-term Airbnb continues to have the potential to dominate this industry for years to come.
On the date of publication, Joseph Nograles held a LONG position in ABNB. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
