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Is Airbnb share price’s still overvalued despite selloff?

Airbnb’s [ABNB] share price tucked up a tidy 16% gain last year. And while it experienced plenty of volatility to get there as it contended with events such as omicron, that’s still a decent return on investment. Yet the start of 2022 is shaping up to be anything but a day at the beach when it comes to Airbnb’s share price.

Nasdaq-listed tech stocks are very much out of favour right now, especially those that are considered overvalued on a fundamental level - and Airbnb’s huge forward price to earnings multiple of 138.89, according to data from Yahoo Finance, isn’t just toppy, it’s sky high.

Monday saw Airbnb’s share price close down 5.63% as the market rout continued, with further losses coming on Tuesday with a closing price of $144.56 - a steep decline from the $209 levels seen at the back end of November.

 

 

 

Headwinds for Airbnb’s share price

Taking a look at Wall Street revenue predictions, Airbnb is forecast to pull in $5.9bn for full year 2021, a big 74.6% year-on-year jump. However, that growth rate is likely to slow, with forecasts calling for growth of 23.7% in 2022. Of course double digit growth rates are nothing to be sniffed at, but investors should ask if the current share price is worth it, especially in this market.

Other headwinds for the online accommodation marketplace include ramped-up competition, notably from Expedia [EXPE] and traditional hotel chains.

 As lockdown restrictions eased, Airbnb’s business boomed, in part from travellers looking for smaller, more out of the way retreats.  While Airbnb may have had a first mover advantage, the big hotel chains and online booking services are either acquiring home rental platforms, partnering with them, or launching their own versions. Wider choice is a good thing for the consumer, but it could also eat into Airbnb’s market share.

$5.9billion

Airbnb's predicted revenue for 2021, up 74.6% year-on-year

 

 

Analyst views of Airbnb share price

Analysts have also been checking out of Airbnb. Robert Mollins analyst Gordon Haskett cut his rating from Buy to Hold this month, in the process chopping his price target from $216 to $172. To be fair, the analyst still thinks Airbnb will be a leading name in online travel, however its competitors are likely to see better gross book value compared to pre-pandemic levels. Added to that, Mollins sees a risk of a revision to first quarter revenues owing to the Omicron variant.

However, while upcoming earnings may see an Omicron shaped dent in sales, the remainder of 2022 could offer some hope.

Piper Sandler’s Thomas Champion may have downgraded Airbnb from Overweight to Neutral earlier in January, but the analyst writes in a note to investors that while "[omicron] clouded the picture, the longer-duration trajectory remains one of steady recovery."

The analyst reckons the outlook for the US travel sector in 2022 should be more akin to 2019 - i.e. the pre-pandemic era - going as far as describing the company as a"top-tier online travel asset and leader in alternative accommodations,"  Still, Champion chomped his price target from $215 to $169 saying it was overvalued compared to peers.

Airbnb is due to update the market sometime in February. In the third quarter, earnings came in at $2.2bn up 36% year-on-year and the company’s biggest haul ever. The next set of results could go some way to determine just how much of a premium the stock is really worth.

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