Airbnb Stock Analysis #shorts

For more detailed analysis: https://www.overlookedalpha.com

Airbnb posted Q3 earnings yesterday and the stock plummeted 13%.

But on its face, the Q3 report was good.

Free cash flow for the quarter hit almost a billion dollars.

Nights and experiences were up 25% year on year, revenue was up 29% and net income was up 46%.

Bear in mind that those numbers would have been higher had it not been for currency headwinds . [Excluding FX, net income would have come in 61% higher].

That stock price drop means Airbnb now has an enterprise value of 52.5 billion with 9.6 billion in cash and 2 billion in debt.

Revenue over the last 12 months was 8 billion, net income was 1.6 billion and free cash flow was 3.3 billion. So the company is valued at 6.5 times revenue, 38 times net income and 16 times free cash flow.

A major issue for investors is whether we are witnessing peak Airbnb. The company benefited from a boom in travel following the pandemic which means next year’s numbers will face tough comparisons.

Looking ahead, management said bookings would moderate in the fourth quarter. And a glance at Google search data shows that Airbnb search traffic is trending lower.

On top, social media is full of complaints about high cleaning fees and high rates. But, the company’s move to all-in pricing could change this perception..

Also, a fall in bookings is partly seasonal and Airbnb is benefitting from a longer term trend of flexible working.

Stays of more than 28 days have held up well at around 20% of all nights booked. Plus a 41% free cash flow margin and a 49% adjusted ebitda margin show the company has improved efficiency following the pandemic.

Assume that Airbnb can grow revenues at 12% annually for the next 5 years. With a 40% ebitda margin, adjusted Ebitda hits 5.7 billion. A 20 times multiple on those earnings gets the company to an enterprise value of 113 billion in 5 years time. That would be an investment return of 16.6% a year.

A profitable business and a driven CEO mean Airbnb can meet those targets. Shares may fall short-term but they are likely to be much higher in 5 years time. I give the stock a bullish rating and I do own shares in the company.

But these are my personal opinions and not financial advice. For more detailed analysis, visit our website.