Airbnb is the worlds largest alternative accommodation and travel agent, with a highly anticipated IPO in 2021, we take a look to see Should I Buy Airbnb stock in 2021?

About Airbnb Stock

Four million hosts share their home with Airbnb making the group the worlds largest provider of alternative accommodation. The company allows ‘hosts’ to allow ‘guests’ to stay at their premise via an online platform.

The group lists the below as some of the companies milestones:

  • Listings in over 100k cities accross the world
  • 5.6million listings
  • 220 countries with Airbnb listings

Airbnb has been operating since late 2007 when founders Brian and Joe hosted their first guest through the platform. By August 2008 the platform had processed over $80billion in payments! 2011 saw the first international expansion of the company into Germany.

Airbnb Stock Price

The ABNB stock price is up about 24% this year to trade at $175.13 per share and a market capitalisation of $110billion. This valuation is similar the likes of BOEING, SNAP, SQUARE and BHP for reference.

ABNB stock has a 52-week range of $121.5 to $219.94, meaning the stock currently sit’s around the middle of the 52-week range.

Airbnb Stock IPO

What was the Airbnb IPO Date? Airbnb had its initial public offering on the 9th December 2020, with the stock commencing trading on the 10th December 2020.

What was the Airbnb IPO Price? $68 per share, the company sold 50million shares which valued ABNB at $47billion.

Upon the first day of trading, the stock shot up a massive 112% to trade at $146 per share. Upon the close of the companies, the first day of trading ABNB stock was valued at more than $100billion.

The companies large moves on their first day of trading makes the IPO one of the most successful first-day listings on the NASDAQ.

Should I Buy Airbnb Stock – Peer Comparision

We have decided to compare Airbnb amongst 3 other peers, TripAdvisor, Hilton Hotels and Expedia. Airbnb has the largest market cap of the 4 listed companies. However, the trailing fundamentals seem to tell a mixed story.

ABNBTRIPHLTEXPE
Market Cap106b4.45b45.62b23b
Trailing P/EN/AN/AN/AN/A
Price/Sales (ttm)24.067.13213.99
Revenue/Share (ttm)9.74.616.115.78
Price/Book (mrq)30.885.722121.03
Fundamental Comparisons of AirBnB Peers

Airbnb stock trades on some hefty multiples in comparison to other listed travel companies such as TRP or HLT. The group however runs a completely different business model the likes of Hilton, with the model more similar to something like TRIP or EXPE. Multiples are still significantly higher than both of these companies!

From the above, you can see Airbnb's revenues were growing at a substantial rate up until FY2019. However, as you can see from a direct result of COVID all four travel brands have been impacted across the board. Interestingly enough whilst Expedia, Hilton and Trip all declined by over 50% Airbnb revenues only fell by about 30%.

31/12/1731/12/1831/12/1931/12/20LTM
EXPEDIA1,117.001,263.001,315.00-1,227.00-618
AIRBNB-11.5288.75-383.08-3,335.42-2,834.90
HILTON1,458.001,746.001,911.00377608
TRIP173232243-242-217.0
ABNB Peer Comparison - EBITDA

A comparison of the EBITDA between the companies shows that Airbnb is of the last financial year a loss-making business.

It's incredibly important to remember that fundamentals only show what's happened in the past, in order to come up with a future valuation one must make assumptions on how the business will perform into the future.

AIRBNB Stock - 2Q21 Earnings Report

The world is still recovering from the COVID-19 pandemic, however, it is not apparent that people of the world are once again looking to travel and stay abroad at Airbnb's accommodation.

The companies 2Q21 report showed, quarterly revenue was up significantly by 299% compared to the prior comparable quarter of $335million to now sit at $1.3 billion. This is also higher than the pre-pandemic levels of Q2 2019.

In our opinion this shows that confidence is returning to the travel sector and more and more people are looking to travel once again. We anticipate a travel explosion over the medium term as people will tend to utilise the additional savings they were able to accrue during the pandemic. This should also continue to be bullish for shares of Boeing as airlines resume buying planes.

Should I Buy Airbnb Stock - 2Q21 Earnings Report Metrics
Should I Buy Airbnb Stock - 2Q21 Earnings Report Metrics

The travel rebound is upon us and Airbnb is leading the way. For the past year, we’ve benefited from the adaptability of our business model, and we’ve focused on driving product innovations to meet the changing needs of our guests. The strength of our Q2 results indicate two things: people are ready to travel, and Airbnb is ready to host them.

Airbnb 2Q21 Earnings Report Shareholder Letter.
Should I Buy ABNB Stock - Income Statement

As per the groups 2Q21 earnings report ABNB produced over $2.2billion of revenue for the half, this is up significantly from the pcp of 2020 where the group only generated approximately half this number.

The groups net loss expanded to $1.2billion for the half with the company spending significant amounts on product development and sales and marketing. As the company matures we would expect to start seeing increased revenues and product development and marketing expense as a percentage of revenue start to trend downwards.

Airbnb Income Statement 2Q21
Airbnb Income Statement 2Q21

The company currently has a net loss per share of -$(2.05) which has reduced from the prior period of -$(3.48). For the three months ended 2021, the group is getting close to returning a positive EPS.

ABNB Balance Sheet

Airbnb's balance sheet shows total assets at $15.48 billion vs total current liabilities of $9.49 billion. This is positive as the company has enough assets to cover the groups short term liabilities. Assets also cover the groups total liabilities.

Airbnb has a debt to equity ratio of 58.4% with debts of $1.9 billion vs equity of $3.93billion. This is a reasonably high debt to equity ratio, however it's worth remembering that ABNB has undoughtably withstood the brunt of the COVID pandemic and didn't take on debt until 2020, to assist with the groups balance sheet.

We will be looking for the group to be able to start reducing the debt load in coming quarters.

Airbnb Stock Balance Sheet 2Q21
Airbnb Balance Sheet 2Q21

ABNB Earnings Date 2021

Airbnb will report their 3Q21 results in September with Full year results to be presented in December 2021.

Should I Buy Airbnb Stock - Ownership and Insiders

Airbnb Stock Ownership Breakdown

Airbnb stock is predominantly owned by the general public at 34.1%. This is followed by institutions and insiders at 32.4% and 22% respectively. The individual insider share is decent considering the large market cap of the company.

Airbnb Stock Ownership breakdown
Airbnb Stock Ownership breakdown
Airbnb Stock Ownership - Top Shareholders

CEO and Co-Founder Brian Chesky owns about 10% of the company. This is a significant value provided the over $100billion market cap of ABNB stock. We will be interested if Brian was to start selling any large portions of shares on market and will monitor this going forwards.

OwnershipNameSharesCurrent Value
10.86%Brian Chesky67,244,811$11.4b
10.01%Sequoia Capital Operations LLC61,992,537$10.5b
9.4%Nathan Blecharczyk58,254,185$9.9b
4.65%Greylock Partners28,814,566$4.9b
2.02%Capital Research 12,539,815$2.1b
1.98%Jennison Associates LLC12,287,037$2.1b
Top 6 Shareholders in Airbnb Stock

VC ownership sit's around 10%, this is less than other companies such as DOCN or COIN.

Airbnb Stock Ownership - Recent Insider Transactions
DateValueNameEntitySharesMax Price
27 Aug 21-$7,942,320Joseph GebbiaI51,333US$156.01
01 Jul 21-$7,701,094Joseph GebbiaI49,824US$157.01
27 May 21-$68,055,540Nathan BlecharczykI486,111US$140.00
Recent Insider Transactions for ABNB

Should I Buy Airbnb Stock - Prophets Take

The saying goes you should buy companies where you understand and use the products, this is certainly the case with Airbnb. I typically book through either ABNB or bookings when staying away for business trips or holidays.

The group seems to have turned the corner on COVID and has started producing booking levels to pre-pandemic levels. The 2Q21 report seems to point to improving metrics moving forwards.

Whilst the company appears overvalued compared to traditional peers in the marketplace we believe the group will continue to add hosts and customers into the platform and there is still significant room for the top line to expand here.

Arguably the company has been able to withstand one of the worst challenges that would pose to the business and has come out the otherside in a reasonably strong position.

Prophet will be monitoring the share for a number of KPI's moving forwards including:

  • Increasing EPS and improving sales
  • increased booking through the platfrom
  • reducing current debt load to lower the debt to equity ratio
  • re-opening of the world to pre-pandemic levels
  • confidence returning in the travel space
  • decreasing sales and marketing and product development expenses as a percentage of the groups revenue.

Prophet has taken a small starter position in the company, should the above metrics look to improve we may consider adding additional exposure to the company.

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