Airbnb, Inc. (NASDAQ: ABNB) is a platform that connects hosts and guests to rent places and activities online or through mobile devices. It walks hosts through the listing process and gives them a set of tools to help them manage their listings, such as scheduling, merchandising, integrated payments, community assistance, host protections, price guidance, and review comments. It now has 4 million hosts who have welcomed over 1 billion visitors to over 100,000 cities in almost every country and region globally.
- Surge in Revenues: ABNB reported significant growth of 77.04% YoY in its revenues to USD 4.46 billion during 9MFY21 (ended September 30, 2021) compared to USD 2.52 billion during 9MFY20, attributable to the recovery in Nights and Experiences Booked combined with higher Average Daily Rates (ADRs)
- Decline in Net Losses: The company recorded net losses of USD 406.54 million during 9MFY21 vs. USD 696.87 million during 9MFY20.
- Strong Balance Sheet: As of September 30, 2021, the company had cash and cash equivalents (including marketable securities) of USD 7.92 billion and total debt of USD 1.98 billion.
- Growth in GBV: ABNB reported a Gross Booking Value (GBV) of USD 35.6 billion during 9MFY21 from USD 18.0 billion during 9MFY20.
- Foreign Exchange Rate Risk: ABNB earned 50% of its revenue in currencies other than the US dollar in FY20, putting it at risk of currency volatility. Though it has taken currency forwards contract to mitigate the fluctuation in prices, still this risk persists. Any unfavorable movement in the exchange rates would harm the company's financials.
- Seasonal Business: According to ABNB, the first, second, and third quarters of an average year have more nights and experiences booked than the fourth because tourists want to travel during peak travel season, which is in the third quarter for North America and EMEA. As a result, any decline in expected quarter revenues, whether due to a shift in consumer preferences, host activity patterns, or concerns about Covid-19, could significantly impact the company's full-year results.
- Optimistic Prospects: ABNB forecasted a strong Q4 in a shareholder letter, with higher GBV growth, continued revenue momentum, and higher Adjusted EBITDA margins than Q3FY21. It had over 40% more nights booked for Thanksgiving week in the United States as of the end of September 2021 than it had at the same time last year. According to the company, high travel demand will continue well beyond 2022.
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.
ABNB Daily Technical Chart (Source: REFINITIV)
ABNB's stock price has fallen 18.76% in the past nine months and is currently leaning towards the lower band of its 52-week range of USD 129.71 to USD 219.94. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 33.22, approaching the oversold zone. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 171.96.
Considering the correction in the stock price in the past nine months, robust margins, proven track record, growth in GBV, strong balance sheet, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 144.56, down 2.26% as of January 25, 2022.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.