Airbnb (NASDAQ:ABNB) has been trading rangebound in the last eight months, managing to mitigate equity market risks arising in the first part of the year. ABNB stock is down 4.62% year-to-date to $158.82 after its market capitalization decreased 5.1% in the past five days. Despite that, ABNB stock has gained traction in the past months due to a rebounding travel demand after it was hit hard by Covid-19 restrictions. ABNB stock is expensive, but the recent correction is an opportunity for long-term investors to buy this impending profitable stock.
ABNB stock has adapted rapidly to the new travel demand prompted by lifting pandemic restrictions. The rental marketplace simplified and increased host flexibility in the past quarter, allowing the company to attract 40% more hosts compared to 2019’s fourth quarter (Q4), which should support Airbnb’s long-term growth prospects. Besides, the Travel & Tourism market is projected to advance robustly between 2022 and 2026, up 10.47% per year to $637.7 billion, according to Statista. Moreover, Airbnb’s guests increased the duration of stays in Q4, with nearly half of the stays being longer than a week.
These constructive developments should continue to support ABNB’s financials. The travel industry rebound should provide additional tailwinds to the stock, as well. Despite the Covid-19 pandemic, ABNB stock beat earnings per share estimates in the past three quarters. However, Airbnb’s top-line growth is forecasted to decelerate from a rapid pace of 77.4% year-over-year to $5.99 billion in 2021 to 31.3% to $7.86 billion in 2022. More importantly, after a net loss of $352 million last year, ABNB is expected to turn a profit of $886 million this year, delivering a solid double-digit margin of 11.3%.
If the stock breaks even this year, ABNB is poised for further gains. Moreover, Airbnb had a comfortable cash position of $6.34 billion in 2021, up 38.5% year-over-year. ABNB’s valuation metrics are, however, expensive, trading at a forward enterprise value over EBITDA of 43.1x and a huge price-to-earnings ratio of 121x.
Despite these high valuation metrics, ABNB is a long-term buy poised for secular growth. Its leading position in the home rental sector and the strong travel demand should continue to support the stock. Besides, the company is estimated to break even this year, a strong catalyst for the stock, providing additional upside for the home rental marketplace.
On the date of publication, Cristian Docan 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.