The Airbnb [ABNB] share price opened for trading at $146 per share when it listed on 10 December 2020. At the close on 8 February, it had climbed to a high of $212.68 despite the pandemic battering global travel.
In its fourth-quarter results, Airbnb, helped by online hosting experiences where people showed off skills such as cooking and meditation, reported revenues down 22% to $859m. For the full 2020 year, revenues dropped 30% to $3.4bn. Management said this showed the firm’s resilience, given that it had forecast an annual revenue fall of almost 50%.
Airbnb's full year 2020 revenue - a 30% drop
At the results, the group talked up hopes of a “coming travel rebound” but since then continued restrictions and a resurge in cases caused by the COVID-19 Delta variant have dampened investor sentiment.
The Airbnb share price dropped to $131.88 by the close on 19 July. However, it has recovered slightly as cases fall again in markets such as the UK, to sit at $149.44 at the close on 9 August.
Travel remains at risk
Airbnb is a newly listed stock with a sizeable market capitalisation of $92.2bn according to Yahoo Finance. As such, it is vulnerable to higher interest rates.
It is also in the crosshairs of regulation covering areas from short-term rentals to data privacy.
The COVID-19 pandemic also highlighted that Airbnb is subject to risks from social and geopolitical issues which could hamper traveller demand.
Airbnb is releasing its second-quarter earnings on 12 August.
In the second quarter, analysts forecast that Airbnb will report a loss of $0.36 for the period on revenues of $1.26bn as travellers tentatively begin to pack their suitcases once more.
KeyBanc analyst Justin Patterson is bullish, recently moving the stock to Overweight with a price target of $180. KeyBanc forecasts revenues of $1.34bn for the second quarter with full-year revenues of $5.8bn, well above the $3.4bn in 2020. In 2022, and sees full-year revenues of $7.7bn.
Airbnb's forecasted Q2 revenue
The forecast points out that 90% of Airbnb’s traffic comes directly to the site, with less cash being spent on digital advertising than rivals.
“Not only does this make Airbnb more insulated from digital ad inflation, it also provides more room for margin expansion when revenue accelerates,” Patterson wrote. “Both of these conditions are present today, which we believe leads to significant revenue and EBITDA revision potential versus peers.”
Parkev Tatevosian writing in The Motley Fool, believes Airbnb is at the beginning stages of expansion.
“The hotel and resort industry worldwide is estimated to be worth $1.21tn in 2019. By comparison, Airbnb generated a paltry $10.3bn in bookings in its most recent quarter,” the analyst writes. “Moreover, one of the pandemic trends that's likely to remain in the aftermath of the crisis is expanded remote working opportunities. People working from home will no longer be tied to a single location, freeing them up to travel more than before.”
“The hotel and resort industry worldwide is estimated to be worth $1.21tn in 2019. By comparison, Airbnb generated a paltry $10.3bn in bookings in its most recent quarter” - Parkev Tatevosian
However, Seeking Alpha isn’t so sure: “Airbnb's current valuation is based on the hopes of the company increasing its revenues by 60% in 2021. Even then, ABNB's stock is trading at 16x P/Sales valuation. The market doesn't expect ABNB to deliver any profitability in 2021 and 2022. In our opinion, ABNB stock is currently overvalued. We estimate the fair share value at $67.”
A strong first quarter
In the first quarter, Airbnb reported a 5% rise in revenues to $887m compared with analyst estimates of $717.99m. In addition, it recorded an EPS loss of $1.12 for the quarter, beating the Zacks’ consensus estimate of a $1.15 loss.
It reported 64.4 million nights and experiences booked, up 39% from the fourth quarter and up 13% year over year. FactSet analysts had expected 62.5 million.
“We believe that the changes we’ve seen in travel are long-lasting. The world is never going back to the way it was, and that means that travel is never quite going back to the way it was,” the group said. “But travel is starting to return. While conditions aren’t yet normal, they are improving, and we expect a travel rebound unlike anything we have seen before.”
“With the increased availability of vaccines and the easing of some travel restrictions, there has been greater willingness by guests to search for and book travel later in the year. Offsetting this is the difficulty in predicting factors such as future COVID-19 outbreaks or travel restrictions globally” - statement from Airbnb
However, it also added — as reported in CNBC — some caution.
“Although we have seen booking lead times start to lengthen when compared with Q4 2020, we continue to have limited visibility for growth trends in the second half of 2021,” Airbnb said. “With the increased availability of vaccines and the easing of some travel restrictions, there has been greater willingness by guests to search for and book travel later in the year. Offsetting this is the difficulty in predicting factors such as future COVID-19 outbreaks or travel restrictions globally.”
ETFs to watch
Two ETFs that can be impacted by fluctuations in the Airbnb share price are the ETFMG Travel Tech ETF [AWAY], where it has a 5.44% weighting and the Renaissance IPO ETF [IPO], where it has a 4.37% weighting on Aug 9.