Airbnb Inc (ABNB) rallied to a 9-month high earlier this month and has risen more than 76% from a record low in December. The company reported better-than-expected Q4 EPS forecast Q1 revenue that was above the consensus as travel demand remains robust with the easing of the global pandemic. However, Airbnb’s frothy valuation has many analysts worried about the rally's sustainability.
The recent rally in Airbnb has pushed its valuation relative to a measure of earnings even further above peers such as Expedia Group (EXPE) and Booking Holdings (BKNG). Airbnb is trading at an enterprise value to estimated earnings before interest, taxes, depreciation, and amortization ratio of 21 times, well above the 13 times for Booking Holdings and the 7 times for Expedia Group.
Morgan Stanley this month retained an underweight stance on Airbnb and said the stock is “already priced for even faster growth.” According to Miller Tabak, Airbnb trades more like a technology stock than its closest peers and is concerned “about how much more the stock can rally.” According to data compiled by Bloomberg, Airbnb has five sell or the equivalent recommendations from analysts covering the stock. That is the most of any Nasdaq 100 ($IUXX) (QQQ) company after Intel (INTC), Tesla (TSLA), and Cognizant Technology Solutions (CTSH).
The trends that supported the rally in Airbnb during the pandemic to a record high in 2021 have reversed. During the pandemic, people rented large rural homes for weeks and months at a time. However, with the reopening from the pandemic, travelers are now opting for shorter stays in big cities and more international destinations. As a result, some analysts are concerned that a slowdown in the number of nights booked and headwinds on average daily rates may pressure sales growth and margins this year.
While Airbnb has been boosting its profitability by cutting costs, that may not be enough to increase its revenue. According to the average estimates of analysts compiled by Bloomberg, Airbnb’s revenue growth is projected to fall to 14% this year from 40% last year. Golbalt Investments said the 44% rally in Airbnb this year has “come a bit far and a bit fast.”
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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