- Airbnb (ABNB) shares slid nearly 6% on Monday for a new 2022 (and all-time) low close.
- The company delivered blockbuster first quarter earnings less than two weeks ago showing massive revenue growth and Q2 guidance that exceeded analyst expectations.
- Airbnb still faces challenges, but investors looking for bargain long-term growth opportunities should consider ABNB stock.
Airbnb (NASDAQ:ABNB) may be off to a solid start in 2022, but the same certainly can’t be said for ABNB stock.
On May 3, the company reported its Q1 2022 earnings, which showed that Airbnb is stronger than ever. Revenue for the quarter was $1.5 billion. That’s up 70% year-over-year and perhaps more importantly, it’s up from pre-pandemic Q1 2019 by 80%. The company’s net loss in the quarter narrowed to $19 million. That’s a whopping $1.2 billion better than in Q1 2021, and $273 million better than in Q1 2019. Free cash flow of $1.2 billion is an all-time high for the company.
In addition, the company issued Q2 revenue guidance of $2.03 billion to $2.13 billion, blowing past analyst expectations.
The market reaction? Airbnb stock popped the next day. But this is 2022, so it was quickly sliding again. On May 16, it closed at $114.44, a new all-time low. With ABNB stock down by a third since the start of the year and off its February 2021 high close by 44%, opportunity knocks for long-term growth investors.
Travel Is Picking Up and Airbnb Is More Popular Than Ever
Airbnb suffered early in the pandemic as lockdowns and fear of Covid-19 decimated travel. However, the worst has long been in the rear-view mirror. Globally, travel has been picking up. Recent Covid-19 variant waves have delayed a full recovery, but looking at global airline revenue projections for 2022 versus 2019, progress is being made. In addition, Airbnb has been very successful at taking advantage of the remote work trend. Strong growth in long-term rentals (28 days or more) has helped to more than make up for a travel sector that isn’t yet fully recovered.
Even during the pandemic, Airbnb and its business model had strong support. Scott Galloway is a marketing professor at New York University Stern School of Business. In October 2020, he wrote: “I believe this time next year, Airbnb will be the most valuable hospitality firm in the world and one of the world’s 10 strongest brands … The SF platform will likely be worth more than the three largest hotel firms, combined.”
He was off a bit in that prediction — according to my calculations, the three largest hotel chains currently have a combined market cap of about $98 billion compared to Airbnb’s roughly $73 billion. But this is 2022. Anything associated with the tech sector has been underwhelming in its performance.
At any rate, Galloway was correct in that Airbnb has been successful in continuing to build a globally recognized brand. Those Q1 earnings don’t just show that people are spending more than ever on Airbnb rentals. They also show that more people than ever are joining the platform to rent out their property as hosts. And that growth isn’t limited to cities. According to the company, non-urban active listings in North America increased by 21% in the quarter.
As travel continues to recover and Airbnb listings continue to grow, revenue growth will continue. Profitability is approaching. The case for buying ABNB stock at its current discounted price is a strong one.
Challenges Remain, Some More Difficult Than Others
Anyone thinking about investing in ABNB stock needs to know that the company does face some challenges. In the short term (hopefully), the challenges are the war in Ukraine and ongoing Covid-19 waves. There are also macroeconomic headwinds in play. If inflation and interest rates trigger a recession, travel will definitely suffer.
In the longer term, Airbnb’s business model continues to face pushbacks. Among the issues the company has to deal with are accusations it is triggering rental housing shortages in cities, violent crowds at party rentals and concerns over Airbnb hosts surveilling guests with hidden cameras.
Should You Buy ABNB Stock?
If — like professor Galloway — you feel that Airbnb is destined to be a global hospitality juggernaut that dwarfs the biggest hotel chains, then ABNB stock at current prices is a definite buy. Just be aware that this Portfolio Grader “B” rated stock does still face a series of challenges that could impact its value.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.