🏠 Airbnb - $ABNB
Airbnb performed better than expected during the corona crisis and is at the forefront of the remote working trend. But the stock is trading at a sky-high valuation and the online travel booking space is looking increasingly crowded. Let’s dive into some of the details to learn more.
📱 Product
Airbnb is a tech company which has become one of the most famous brands in the travel industry.
The company has built a software platform which does not own or maintain any of the properties listed on its website. In theory this should mean that it enjoys high profit margins and low overheads compared to traditional travel operators.
Makes money by taking commissions on booking transactions on its platform.
Also offers “Airbnb Experiences” - in-person or online activities provided by locals such as walking tours, cooking classes, hiking, shopping, outdoor sports lessons and many others.
📈 All Time Price Chart
📊 Key Financials
RoboStox App Snapshot on Tuesday (February 22nd) before market open:
Airbnb Market Cap: $111.13 billion vs:
Marriott International: $57.08 billion
Hyatt Hotels Corporation: $11.11 billion
In Q4 2021, the number of nights and experiences booked on the platform increased to 73.4 million compared to 46.3 million in Q4 2020.
The change in year-over-year Q4 net income is fairly unique and a bit misleading in the case of Airbnb. You might look at the chart below and think that the massive loss in net income of almost $3.9 billion was due to new winter travel restrictions as a result of the corona virus.
→ But according to the company this was actually because of employees exercising stock options. This loss was unusually high as a result of a big run-up in the Airbnb stock price immediately after the IPO. Due to accounting rules this must be recorded as “non-cash stock-based compensation expenses”.
Q4 2021 Profit Margin: 3.55%. This is much worse than Coinbase at 49.97% which I looked at in a previous week. Coinbase is of course another software-driven business which makes money via commissions on platform transactions.
👨 👩 Leadership
CEO: Brian Chesky
After Airbnb’s IPO Chesky reported to the SEC that he owned a total of 12,441,177 shares.
So far the CEO has sold two batches of shares:
441,177 shares at the opening IPO price of $68 per share worth just over $3 million.
52,059 shares sold at $194.68 per share worth over $10 million.
According to the filings data, Chesky has 11,947,941 shares remaining, which means he has sold just under 4% of his total holdings to date.
🚀 Bull Case
Airbnb is much more than a travel company. It has cornered the short-term rental market and its “experiences” segment offers another revenue stream which rivals have been slow to copy.
The company was able to perform better than the the large hotel chains during the corona pandemic. This is because Airbnb could offer a variety of domestic stays in more remote locations which wouldn’t make business-sense for large hotel groups.
The corona crisis also demonstrated that the company was willing to be disciplined in spending. For example, it cut excess digital marketing expenses which didn’t add significant value to the bottom line. Airbnb is now a much leaner operation as a result.
The CEO has only sold 4% of his shares. Such a small percentage is always a positive sign. (Compare this with Coinbase CEO Brian Armstrong who has sold over 71% of his shares).
🐻 Bear Case
Persistent corona uncertainty - it appears that the pandemic is slowly drawing to a close but some scientists warn that we may have to live with the virus for many years to come. There is always the risk that yet another covid variant could emerge which would impact the company and its stock price.
Improving competition - major hotel chains such as Marriott and Accor have been buying up online rental and travel booking companies to compete directly with Airbnb. The technology involved is not particularly unique or hard to copy. This means Airbnb does not have a natural moat if rivals decide to undercut on price and can offer high-quality inventory.
High valuation - Airbnb is currently trading at a high premium of almost 139 times next year’s earnings. (Tesla is at 88.5 and Coinbase is at almost 27). This premium makes the stock vulnerable to potential macro-economic headwinds such as higher interest rates as investors rotate away from riskier high growth stocks.
Tightening regulation - Airbnb has received a lot of criticism for the outsized impact that its listings have had on local rental prices, property values and crime levels. Cities have already restricted or banned Airbnb rentals altogether in certain parts of the world. If these regulatory actions continue this would obviously be damaging for the business.
What did I miss? - These reports are a learning process for me and I’m very open to constructive feedback and suggestions.
What stock or crypto asset should I cover next? You can contact me by email: hellorobostox@gmail.com or feel free to leave your response in the comments. You can also follow me on Twitter: @daneasterman.
Disclaimer: I am not a financial advisor, none of this report should be taken as financial advice. Instead this should be viewed as starting point to conduct your own research. I do not hold any positions in Airbnb stock at the time of writing.