Why Airbnb stock rally is not justified

Airbnb (NASDAQ: ABNB) the stock has risen by almost 55% since the beginning of 2021 and is currently trading at levels of approx. $ 216 pr. shares. The stock has risen solidly 3 times since the IPO in early December 2020. Although there has been no news from the company that justifies gains of this size, there are a few other trends that have likely helped push the stock higher. First, sales coverage increased significantly in January as the quiet period for bank analysts guaranteeing Airbnb’s IPO ended. Over 25 analysts now cover the stock from just a few in December. Although analyst perceptions are mixed, it has nevertheless likely helped to increase visibility and drive volumes for Airbnb. Second, the Covid-19 vaccine outbreak is gaining momentum in the United States with up to 1.5 million doses administered per day, and Covid-19 cases in the United States are also on a downward trend. This should help the travel industry eventually return to normal, with companies like Airbnb seeing a significant recovery in demand.

That said, we do not believe that Airbnb’s current valuation is justified. (Related: Airbnb valuation: Expensive or cheap?) The company is valued at about $ 130 billion or about 31x consensus 2021 revenue. Airbnb sales are likely to grow by about 37% this year. For comparison online travel giant Expedia which also owns Vrbo, a growing holiday rental company, is valued at approx. 20 billion $ or almost 3x expected 2021 revenue. Expedia is likely to increase revenue by over 50% in 2021 and by around 35% in 2022 as the company recovers from the Covid-19 decline.

[12/29/2020] Select Airbnb over DoorDash

Earlier this month, the online holiday platform Airbnb (NASDAQ)
NDAQ
: ABNB) – and start-up of food delivery DoorDash (NYSE: DASH) was listed with their shares large jumps from their IPO prices. Airbnb is currently valued at as much as $ 90 billion, while DoorDash is valued at around $ 50 billion. So how do the two companies compare, and which is probably the better choice for investors? Let’s take a closer look at the recent results, valuation and prospects for the two companies. Airbnb vs. DoorDash: Which stock should you choose?

Covid-19 helps DoorDash numbers, Airbnb hurts

Both Airbnb and DoorDash are essentially technology platforms that connect buyers and sellers of vacation rentals and food, respectively. Looking solely at the basics of recent years, DoorDash looks like the more promising game. While Airbnb trades at around 20x expected revenue from 2021, DoorDash only trades around 12.5x. DoorDash’s growth has also been stronger, with revenue growth averaging approx. 200% per year between 2018 and 2020, as demand for takeout rose sharply through the Covid-19 pandemic. Airbnb grew revenue at an average rate of approx. 40% ahead of the pandemic, where revenues are likely to fall this year and get close to the 2019 level in 2021. DoorDash is also likely to have positive operating margins this year (around 8%) as costs grow more slowly compared to rising revenues. While Airbnb’s operating margins have been at a break-even level for the past two years, they will be negative this year.

The Airbnb story still has appeal

However, we believe that the Airbnb story has more appeal compared to DoorDash for a few reasons. First, in the short term, Airbnb stands to gain significantly from the end of Covid-19 with highly effective vaccines that have already been rolled out. Holiday homes need to come back nicely, and the company’s margins also need to take advantage of the recent cost reductions it has made through the pandemic. DoorDash, on the other hand, is likely to see moderate growth significantly as people begin to return to eat at restaurants.

There are also a few long-term factors. Airbnb’s platform scales much more easily into new markets, where the company operates in around 220 countries compared to DoorDash, which is a logistics-based business that has so far been limited to the United States alone. While DoorDash has grown to become the largest food supplier player in the US with a share of approx. 50%, the competition is intense and the players compete primarily on cost. While barriers to access to the vacation rental area are also low, Airbnb has significant brand recognition, as the company name becomes synonymous with vacation home rentals. In addition, most hosts also have their lists unique to Airbnb. While rivals like Expedia are looking to enter the market, they have much lower visibility compared to Airbnb.

All in all, while DoorDash’s financial metrics are currently looking stronger, with its valuation also slightly more attractive, things could change after Covid. Given this, we think Airbnb might be the better choice for long-term investors.

[12/16/2020] Understanding the value of the $ 75 billion Airbnb share

Airbnb (NASDAQ: ABNB), the online marketplace for vacation rentals, was listed last week, with the stock nearly doubling from the IPO to $ 68 to approx. $ 125 at the moment. This puts the company’s valuation at around $ 75 billion per year. Tuesday. It’s more than Marriott – the largest hotel chain – and Hilton hotels combined. Does Airbnb – which has not yet made a profit – justify such a valuation? In this analysis, we briefly look at Airbnb’s business model and how its revenue and growth trends. See our interactive dashboard analysis for more details. In our interactive dashboard analysis for Airbnb valuation: Expensive or cheap? we break down the company’s revenue and current valuation and compare it with other players in the hotels and online travel space. Parts of the analysis are summarized below.

How has Airbnb’s revenue evolved in recent years?

Airbnb’s business model is simple. The company’s platform connects people who want to rent their home or spare rooms with people who are looking for accommodation and making money primarily by charging a separate service fee for the guest as well as the host involved in the reservation. The number of nights and experiences booked on the Airbnb platform has increased from 186 million in 2017 to 327 million in 2019, with gross bookings increasing from around 21 billion. $ In 2017 to about 38 billion. The share of gross bookings that Airbnb recognizes as revenue increased from $ 2.6 billion. $ in 2017 to about 4.8 billion. $ in 2019. However, the number is likely to fall sharply in 2020, as Covid-19 has hurt the holiday rental market, as total revenue is likely to fall by about 30% the year before. . As vaccines roll out in developed markets, things are likely to start returning to normal from 2021. Airbnb’s large inventory and affordable prices should ensure that demand recovers sharply. We expect revenue to be around $ 4.5 billion by 2021.

Understanding Airbnb’s $ 80 Billion Valuation

Airbnb was rated at approx. 75 billion Dollars from Tuesday’s end, which translates to a P / S multiple of approximately 16.5 times our expected 2021 revenue for the company. In perspective, Booking Holdings – among the most profitable online travel agencies – traded at around 6x revenue in 2019, while Expedia traded at 1.3x and Marriott – the largest hotel chain – was rated at around 2.4x pre-pandemic sales. In addition, Airbnb will remain deeply loss-making with operating margins of -16% in 2019 versus 35% for reservations and 7.5% for Expedia. However, the Airbnb story still has appeal.

First, growth has been and is likely to remain strong. Airbnb’s revenue has grown by over 40% each year over the past 3 years compared to levels of approx. 12% for Expedia and Booking Holdings. Although Covid-19 has hit the company hard this year, Airbnb should continue to grow with high double-digit growth rates also in the coming years. The company estimates its total addressable market at approx. $ 3.4 trillion, including $ 1.8 trillion for short-term stays, $ 210 billion for long-term stays and $ 1.4 trillion for experiences.

Second, Airbnb’s asset light model should also help its long-term viability. While the company’s variable costs amounted to approx. 25% of revenue in 2019 (for a gross margin of 75%), fixed operating costs such as sales and marketing (approximately 34% of revenue) and product development (20% of revenue) are currently high. As revenues continue to grow after Covid, the absorption of fixed costs should be improved, which helps profitability. In addition, the company has also trimmed its cost base through Covid-19, as it laid off about a quarter of its employees and abolished non-core activities, and it is possible that combined with the possibility of a strong recovery in 2021, profits will have to turn up.

That said, a 16.5x forward revenue multiple is high for a business in the online travel industry. And there are risks, including potential regulatory barriers in large markets and adverse events in properties reserved through its platform. The competition is also increasing. While the Airbnb brand is strong and generally synonymous with short-term rental rentals, the barriers to access to the space are not too high, just as Booking.com and Agoda are launching their own vacation rental platforms. Given its high valuation and risks, we believe that Airbnb will have to perform very well just to justify its current valuation, let alone lead to further returns.

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