Airbnb (NASDAQ:ABNB) is one of the latest US tech stocks to garner popularity amongst investors, especially as a COVID-recovery trade. Airbnb is an online rental marketplace, which connects travelers and property owners, and has brought innovative disruption to the tourism and travel industry in the last decade. The company boasts 150 million users worldwide, with 4 million hosts having listings across over 100,000 cities. The recent milestone was the IPO in December 2020, which has given investors a roller-coaster ride since. The Airbnb stock opened at ~$150 and quickly climbed to ~$220 in February of this year due to the long-term potential of the stock, combined with optimism around vaccine programmes and the reopening of international economies. However, the stock has fallen sharply since due to concerns in coronavirus variants derailing and delaying the return of international travel. Here is why we think the stock looks cheap and is primed for a long-term rise.
New booking trends
Airbnb built its business and popularity on the concept of being able to book a weekend getaway through a hassle-free and efficient user experience at affordable prices. The nature of these bookings are now changing, as 25% of the business revenues are now derived from ‘long term stays’, bookings which are over 28 days in length. This is adding a new dimension to the firm’s platform and consumer offering, as lines are blurred between travel, living, and business stays.
More and more companies are introducing hybrid working models, allowing consumers to work from remote locations for longer periods of times, resulting in the concept of “bleisure” travel, blending work from home with leisure vacations. I could be writing this piece from the UK or from New Zealand, and an Airbnb enthusiast could both rent their new, temporary home-base location through the platform, whilst simultaneously renting out their property back home through the same method.
Strong Q2 2021 financials
Despite the concerns and disruption by recent variants and travel restrictions, Airbnb has posted impressive results that are not reflected in the stock price. The key highlight being that bookings are already at the same pre-pandemic levels of 2019, representing over $10 billion in booking revenues per quarter. This can only continue to grow upwards as vaccinated consumers re-gain confidence in traveling again.
At the same time, the company has maintained a strong balance sheet, with over $7 billion cash and moderate levels of debt. This war chest protects the company from any further market stress, as well as being a resource for marketing spend and products & services development in the upcoming periods.
Ready for take off
Whilst we believe the firm is due to benefit from a positive breakout of the above fundamental points, we are also poised for a technical move, as the 50 day and 100 day moving averages have been converging in recent months and approaching a point of intersection. An upward cross of the 50DMA could be the trigger for a swift move back up to $200+ share price last seen at the start of this year.