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Should You Buy This NASDAQ - Listed Consumer Discretionary Stock – ABNB

May 12, 2022 | Team Kalkine
Should You Buy This NASDAQ - Listed Consumer Discretionary Stock – ABNB

 

Airbnb Inc.

Airbnb, Inc. (NASDAQ: ABNB) is primarily a global marketplace for accommodations and activities. The Company's marketplace approach links hosts and visitors to book venues and experiences all around the world online or via mobile devices. Homes, cabins, treehouses, yachts, castles, and luxury villas are among the offerings. The Company's website and mobile applications provide visitors an entertaining method to browse a range of homes and activities while also making it simple to book them.

Latest News

  • Airbnb and Airbnb.org announced on February 28 that Airbnb.org would provide free, temporary lodging for up to 100,000 Ukrainian refugees. Airbnb.org has been striving to form relationships with international and regional NGOs on the ground that are managing stays for refugees of all nationalities, races, ethnicities, and gender identities.

Q1 FY22 Financial results

  • Q1 revenue of USD 1.5 billion grew 70% year over year: Revenue also increased by 80% compared to pre-pandemic Q1 2019. Despite the ongoing pandemic, the crisis in Ukraine, and macroeconomic challenges, the robust revenue rise was driven by a mix of growth in Nights and Experiences Booked, as well as continued success in ADR.

Source: Company Filing

  • Q1 net loss of USD 19 million significantly improved from both Q1 2019 and Q1 2021: Airbnb Inc’s net loss in Q1 2022 was USD273 million lower than in Q1 2019, owing to revenue growth and expense control, partially offset by product development expenditure. Due to increased revenue combined with cost control and the absence of some substantial charges in Q1 2022, the net loss improved was USD 1.2 billion compared to Q1 2021.
  • Q1 Adjusted EBITDA of USD229 million was the first profitable Q1 in the previous 3 years: The USD 229 million in adjusted EBITDA in Q1 2022 was a considerable increase from the losses in Q1 2019 and Q1 2021. In Q1 2022, the adjusted EBITDA margin was 15%. This significant increase in Adjusted EBITDA highlighted the company's continuing business performance as well as its cost-cutting focus.
  • Balance sheet and cash flow: The company reported USD 1.2 billion in net cash produced by operating operations and USD 1.2 billion in free cash flow for the three months ended March 31, 2022. Revenue growth and margin expansion, as well as greater bookings driving larger unearned fees, drove the rise in free cash flow year over year. The company has USD 9.3 billion in cash, cash equivalents, marketable securities, and restricted cash as of March 31, 2022.

Key Risks

COVID: The COVID-19 pandemic and the impact of COVID-19 pandemic mitigation activities have had a substantially negative impact on Airbnb Inc's business, results of operations, and financial condition, and will continue to have a materially negative impact.

Attracting hosts and guests: The company's business, results of operations, and financial condition would be substantially harmed if it failed to retain existing hosts and guests or add new guests and hosts, or if hosts failed to deliver high-quality stays and experiences.

Competition: The business and industry in which Airbnb operates are extremely competitive, and the firm may not be able to compete successfully against existing and future rivals.

Outlook

 One year after the century's travel boom began, Airbnb Inc is anticipating another good summer vacation season, with revenue between USD 2.03 billion and USD 2.13 billion expected in Q2 2022. On a year-over-year basis, the business forecasts ADR to be unchanged in Q2 2022. In terms of expenses, Airbnb has made progress in the last two years in terms of lowering per-unit variable costs, improving marketing efficiency, and tightly managing fixed expenses, and the company expects this progress to continue in Q2 2022, resulting in a low double-digit EBITDA margin percentage increase year over year.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

ABNB's stock price has fallen 41.15% in the past six months and is currently leaning toward the lower end of its 52-week range of USD 111.22 to USD 212.58. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 138.13.

Considering a 41.15% correction in the past six months with expected recovery, record breaking results for the first quarter backed with strong fundamentals, positive outlook, associated risks, and current valuation. We recommend a " Buy" rating on the stock at the current price of USD 113.80, up 2.02% as of May 12, 2022, at 11:00 AM PDT.

One-year technical chart as of 12th May 2022, at 11:00 AM PDT. Source: REFINITIV. Analysis by Kalkine group

Technical Analysis Summary

* Current price as of May 12, 2022, at 11:00 AM PDT.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.


Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.