Like many travel stocks, Airbnb (NASDAQ: ABNB) However, the company decided to go public at the end of last year, and the shares rose more than 200% from the initial offer price during the first three months of trading. The stock has fallen about 25% from its recent high.
Airbnb sees incredible growth compared to 2020, but some investors are worried that their success this year will not last long. While the short-term results are uncertain, the company’s long-term growth potential shows that it has an advantage in the travel sector thanks to three competitive advantages.
1. Unique uniqueness
Have you been to a typical hotel site to find a country house or tree house while on vacation? The chances are slim, but it’s rare to stay on Airbnb. If you want, you can spend the night in a dome in Maine. The company is able to offer these unique experiences because it focuses on homeowner satisfaction.
Airbnb says “homeowners will be at the heart of Airbnb” because they are the foundation of the company’s platform. To attract homeowners, the company strives to make the service simple and easy to use. In its latest shareholder letter, Airbnb, “[W]I found that completing a list on Airbnb was more than halved for most new homeowners, “thanks to new tools and resources it released during the second quarter.
Management saw an increase in the number of active lists on the platform, with a consistent 8% increase in “non-urban active listings in Europe and North America” during the quarter. For clear evidence of the company’s ongoing recovery, the number of nights and experiments ordered increased by 197% year-on-year to 83.1 million (a figure that was flat compared to the second quarter of 2019). Airbnb expects that metric to be volatile in the future, but the company will only need to reserve another 3.4% from this last quarter starting tonight to set a new company record.
2. The best place to stay for a long time
Airbnb is also successful in another travel category: long-term stays. During one of the five nights during the second quarter, there are long-term stays set by the company for 28 days or more. 50% of reserved nights are for nights lasting seven days or longer. Because of COVID-19, many people who work remotely have decided to leave their home office and look for exciting new places to work and live for weeks or months.
The company expects this trend to continue: 81% of Airbnb users who booked a long-term stay in the second quarter said they intend to do the same next year.
3. Strong financial stability
Airbnb also showed financial strength during the pandemic. Now, a new one on the top line is built to reach the highest peak of all time. Revenue for the second quarter was $ 1.33 billion, up 10% from the same quarter in 2019. Reservation Holdings – Another leader in the online travel space – the return was almost unsuccessful. Revenue for the second quarter fell 44% in two years.
“Although the COVID-19 pandemic poses persistent uncertainty for our future outcomes, we expect our third-quarter earnings to be the strongest quarterly earnings on record in the third quarter of 203 and provide the highest adjusted FVDC dollars,” the board said in a statement. . and perpetual margin. “
Airbnb also managed to increase its average nightly booking value, up 38% from the second quarter of 2019 to $ 161.45. Unearned payments – revenue from consumers who have already booked and paid for travel but are not yet registered – increased 41% over the same period to $ 1.48 billion. The company has been consistently unprofitable – losing $ 1.27 billion in the first half of this year – while also making $ 1.27 billion in free cash flow.
Expectations are high
The main concern for investors is the valuation: Airbnb has 23.2 times more sales. The market has higher expectations for Airbnb compared to Booking, where sales are only 14.1 times.
Although the company expects some declines and declines over the next few quarters due to pandemic uncertainty, stocks are also expected to fluctuate in the future. However, Airbnb has emerged as the most popular platform for home sharing experiences in the travel industry, and this leadership position can help it continue to grow in the long run.
This article reflects the views of a writer who disagrees with the “official” recommendation position of the Motley Fool Award Advisory Service. We are colorful! Asking for an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us be smarter, happier and richer.