By now, you might have heard that The Real Housewives of New York alum Dorinda Medley is renting out her 11,000 square foot Berkshires estate, Blue Stone Manor, for up to eight lucky guests on Aug. 23 and again on Aug. 25. Promoting the two-night stay on Airbnb (NYSE:ABNB), it got me wondering if this was a better buy than ABNB stock.
The global provider of short-term stays went public in December 2020 at $68 a share, above the $56-$60 pre-IPO marketing range set by the company’s underwriters.
ABNB stock gained almost 113% on its first day of trading.
Since then, it’s basically flatlined. So if you bought in the IPO, you’ve probably sold by now. If you didn’t, you probably feel as though you’ve missed an opportunity. Not so fast.
Investors just received the company’s Q2 2021 earnings results. It beat on revenues and bookings. In the third quarter, it expects record revenue. However, it did warn about the Delta variant wreaking potential havoc with its business in the fall.
Rather than put in my two cents on how it did during the quarter, I will instead consider Airbnb’s current price (about $142) and its market capitalization of $90 billion.
Remember, when ABNB went public last December, it was valued at $40.6 billion [597.45 million shares multiplied by $68]. The pro forma cash, cash equivalents and marketable securities were $6.28 billion with $2.0 billion in total debt for an enterprise value (EV) of $36.3 billion.
Fast forward to today. It has a market cap of $90 billion, cash of $6.57 billion and total debt of $2.46 billion. That gives us an EV of $85.89 billion, a 137% increase in its EV in eight months.
Of course, at its mid-February all-time high of $219.94, it would have had an EV of approximately $131.69 billion, 46% higher than it is today and 263% higher than in December 2020.
So, to say that ABNB stock has room to grow is an understatement.
However, of the 34 analysts who cover its stock, only 16 rates it a buy, two see it as overweight, 14 have it as a hold, and two consider it a sell. The average target price for ABNB stock is $173.68, or 16% upside over the next year.
The Key Metrics Over Time
Let’s forget 2020. The year was a write-off for anyone in the hospitality industry. Of course, you might be able to argue that 2021 also isn’t going to be all that great. But, eventually, people are going to come out of their bubbles and see the world.
And when they do, Airbnb will be ready.
In Q2 2021, it had 83.1 million nights and experiences booked, 197% higher than Q2 2020 and 1% less than Q2 2019. GrossBooking Value (GBV), the second important metric, was $13.4 billion, 301% higher than Q2 2020 and 37% higher than Q2 2019.
So, the GBV per night and experience booked in Q2 2021 was $161.25, 35% higher than Q2 2019 ($119,08). Since Q2 2019, the best quarter for nights and experiences booked was 85.9 million in Q3 2019.
For a second, let’s imagine that all four quarters in 2022 match that number; we’re talking about 343.6 million for the entire 12 months, 5.1% higher than the 326.9 million for all of 2019.
In 2019, the GBV per night for the entire year was $116.13. In 2022, at 343.6 million nights and experiences booked and a GBV per night of $159.82, we get a GBV of $54.9 billion.
I don’t care what happens in the third quarter of 2021; I’m concerned about what happens in Q1 2022 and onward. From here to there, I’m sure it’s going to stumble and bumble its way through earnings.
The Bottom Line on ABNB Stock
At the end of June, I thought ABNB was a long-term buy at $150. For those who bought some in mid-July when it dropped into the low $130s, good on you. If it happens again, which it very well could given the Delta variant, I’d back up the truck and buy a bunch.
As for the $100 per person opportunity to live the life of luxury in the Berkshires — albeit for one night only — I’m not sure you’re going to be able to find a better deal in that area at this time of year, Covid or no Covid.
Good luck on both fronts.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.