Airbnb (NASDAQ:ABNB) is a business worthy of ample admiration. Creating something from nothing in existing pockets of the market is fascinating. But going from zero to one, and constructing a brand new niche in an old-fashioned industry, is simply staggering. Its mission is to create a world where “anyone can belong anywhere.“ ABNB stock first joined the public markets in December 2020 with an initial public offering (IPO) on the Nasdaq Stock Exchange. The anticipated IPO was dazzling, and the stock rocketed 135% on the first day of trading.
The San-Francisco-based marketplace has achieved more than 1 billion all-time guest arrivals, and has more than 4 million hosts on its platform. The company has collectively generated more than $150 billion in earnings for hosts and makes profits through fees, charged as a fraction from the total value of all bookings.
ABNB stock is now worth around $186 per share and has a market capitalization of $118.6 billion. The stock is now trading significantly lower from the the February 2021 all-time-high (ATH) of $219.94.
Airbnb has understandably struggled during the pandemic, but recent signs are pointing towards a healthy recovery. The company has a total return of approximately 34% since inception, and is part of the Invesco QQQ ETF(NASDAQ:QQQ) with 0.46% weighting.
The chart below displays the ABNB stock performance since its IPO compared to the S&P 500 and Nasdaq 100 Indices.
ABNB Stock Fundamentals
ABNB stock has recently released earnings for the fourth quarter of 2021. Number of nights and experiences booked came in at 73.4 million, a 59% increase year-over-year (YoY) and 3% up from a more normalized 2019 (no pandemic in 2019). Gross booking value (GBV) was $11.3 billion, up an impressive 91% YoY, and 32% from 2019. Revenue in Q4 2021 was $1.5 billion, up 78% YoY and 38% from 2019.
Average Daily Rates (ADR) was $154 for Q4 2021. That is a 20% jump from 2020 and 36% up from 2019. Net loss for the quarter has decreased to $55 million compared to $3.9 billion in 2020 and $352 in 2019. Earnings per share (EPS) beat street expectations, actual number was 8 cents vs expected 3 cents. Free cash flow (FCF) for Q4 was $376 million vs. street estimates for -$142.6 million.
Investors can argue that ABNB stock came into the market massively overvalued, and that future growth was already priced in the IPO price. But the company is now trading around a 20x price/sales ratio for the last 12 months (LTM) and has massive potentials in a “come-back” and ever-growing industry.
A Work-From-Home Stock
ABNB stock is now marketing itself as a work-from-home stock. Brian Chesky, the CEO of the company recently announced he will be working indefinitely from Airbnb-listed homes around the world, bouncing around new spots every few weeks.
ABNB stock is capitalizing on the post-pandemic shift to remote work and the great resignation initiative. The company is betting big on flexible work and long duration stays (lodging). In fact 20% of stays booked in Q4 were for a month, or more.
Business Outlook
Despite the Omicron variant, “appetite for travelling continues to grow,” as there was a 70% increase YoY on global travel search volume. More travelling and extended stays will allow Airbnb to grow earnings and FCF. The sky is the limit for ABNB stock, as the world has been travel-suppressed for two years, and the labor landscape is evolving towards remoteness and flexibility.
Airbnb has been enhancing product offerings, making it easier, safer and faster for people to use its services. Examples include aircover insurance, translation efforts and a simpler home listing process for hosts.
The holistic experience of residing at an Airbnb is arguably and coherently superior than staying at traditional hotels like Marriott International (NASDAQ:MAR) Hilton Worldwide (NYSE:HLT). Nevertheless, there has been an encouraging rebound for traditional hotel stocks. The recovery shows signs of activity returning to pre-pandemic levels.
In the latest earnings, Airbnb management predicted a slightly lower revenue for Q1 2022. In spite of that, I expect the stock to beat those expectations and continue to flourish in the markets.
In 2021, ABNB stock had 300.6 million nights and experiences booked, 56% up from 2020 and 8% up from 2019. With an improved average daily rate, untapped potential in Asia (where people have not yet returned to travel) and a strong work-from-home surge, the company is well positioned to take advantage of what’s to come.
I anticipate that strengthened marketing and technology will allow ABNB stock to reach $20 billion in gross booking value (GBV) in 2022. Management has proven high competence during the black-swan Covid-19 recession, so I expect management to be able to take full advantage of the advantageous-to-Airbnb market now and in the long run.
On the date of publication, Jonathan Tang held a LONG position in ABNB stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jonathan Tang has gained extensive experience in the financial services industry in London. He has completed valuable projects for companies such as Bloomberg, London Stock Exchange Group and FactSet. He holds a master’s degree in Investment & Risk Finance and has completed an MBA course at the London School of Economics. Jonathan has a passion for fintechs that democratize investing, stock market and public equities, ETFs, start-ups and real estate.
