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Airbnb
stock has had a rough year. Shares of the short-term room and house rental marketplace are down 5% since December and 37% since peaking in February, amid investor anxiety about how lingering Covid issues will affect consumer travel plans. For intrepid investors, opportunity appears to be knocking.
On Thursday, BTIG analyst Jake Fuller raised his rating on Airbnb shares (ticker: ABNB) to Buy from Neutral, with a target price of $170. He notes that in the same period that the stock has been selling off, estimates have been ratcheting higher.
Airbnb stock is down 0.6%, at $138.42, in recent trading. The
S&P 500
is down 0.1%.
“The pullback from a mid-February high is a big part of our upgrade, with the stock going from more than $200 to under $140,” he writes. “Valuation had been our chief concern and multiple compressed from 23 times 2022 revenue in mid February to 12 times now…. Renewed Covid uncertainty yields an appealing entry point for one of the most compelling models in our coverage.”
Fuller thinks that Airbnb is better situated than online travel agency stocks in the event that the Delta variant leads to new travel restrictions. But he also thinks that consensus estimates for the year appear “way too low” if the Covid situation doesn’t deteriorate the travel market.
He adds that “alternative accommodations” have gone mainstream—and he thinks penetration of alternatives to traditional hotels and motels will jump to 30% by 2025, from 12% in 2019. Airbnb CEO
Brian Chesky
makes exactly that point in a new interview with Barron’s.
“We also see significant incremental opportunity” from both sponsored listings and an increase in the company’s experiences segment, Fuller adds.
Fuller concedes that he can’t say how a Covid resurgence might impact travel, but he asserts that Airbnb is better situated than other travel businesses to deal with it. He notes that its business was down less than peers in the initial lockdown—and that it is the only player to return to 2019 booking levels.
“If rising case counts don’t yield restrictions or change behavior…consensus numbers are too low,” Fuller writes. His booking estimates for Airbnb are 20% above consensus for the June quarter and 15% above the Street for the full year. Current Street estimates call for revenue of $1.2 billion in the June quarter, $1.9 billion in the September quarter, $5.4 billion for calendar 2021, and $7 billion for 2022. Fuller is above the Street on all counts—he sees $1.3 billion for the June quarter and $2.5 billion for the September quarter—with $6.2 billion for this year and $7.5 billion next year.
In the March quarter, Airbnb posted revenue of $887 million, up 5% from a year earlier, while gross bookings were $10.3 billion, up 52% from 2020—and 3% higher than the same month in 2019.
The bottom line: Fuller thinks Airbnb will be “at the leading edge of the travel recovery,” with growth from there at five times the rate of the other online travel agency players.
Write to Eric J. Savitz at [email protected]