ABNB - ABNB: Short-Term Rentals With Long-Term Gains

2024-06-02 15:12:37 ET

Summary

• AirBnb results experienced a drop after Q1 earnings, attributed to less optimistic Q2 forecasts and hawkish investors.
• Despite the drop, AirBnb's unique business model and moat was what earned it a spot on the S&P 500 list in the first place.
• The shift in travel demographics, resilience to macroeconomic forces, ease of entering less penetrated regions and listings with flexibility and affordability will serve as the core impetus for future growth.
• However, AirBnb is greatly affected by seasonal trends and investor sentiments.
• Risk factors include potential overvaluation, legal restrictions and solo traveling preferences. While my valuations suggests that the stock is still overvalued, this may change with ABNB's promising roadmap for development.

Introduction

AirBnb (NASDAQ: ABNB ) has always been a unicorn in the accommodation sector, paving the way with its first mover advantage into the peer-to-peer accommodation sharing industry in 2009. Since then, it has opened up opportunities for homeowners who want to interact with travelers of various walks of life via subletting, to homeowners that own multiple properties and rent them out frequently to travelers for profit generating. With such a decentralized, authentic and versatile value proposition, it was no surprise that it entered the S&P 500 ( SP500 ) within 3 years of its IPO (Dec 10, 2020). As 1 out of 4 in the index fund (alongside Booking Holdings Inc. (NASDAQ: BKNG ), Hilton Holdings Inc. (NYSE: HLT ) and Marriott International (NASDAQ: MAR )), it is a strong contender amidst the other vacation booking giants. Once the IPO debuted, investors snapped up shares, causing its share price to skyrocket from $61 to $146 in less than a day, a 112% increase. 4 years later, however, we now return to IPO level prices, a price that investors may be apprehensive about. In my opinion, while such hesitation is justified, it is not the be all and end all for ABNB. Instead, investors should wait for ABNB to intrinsically enhance its business model, while remaining cognizant of the cyclical nature of seasonal trends that affect its quarterly prices; the time to hold is now, but the time to buy is coming.

Market Share: Shift Towards Vacation Rentals?

Looking at the vacation booking market share , ABNB holds a 15.5% stake, the second amongst all online booking services behind VBRO (under Expedia Holdings). While there are over 20 market competitors, there are 4 key players excluding the “Direct” segment: ABNB, BNKG, Expedia Holdings (NASDAQ: EXPE ), Tripadvisor (NASDAQ: TRIP ). Unlike ABNB which solely focuses on short term rentals. The latter three own a series of services in vacation planning, including booking of plane tickets, tour packages and budget hotels....

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