Is this digital travel name a buy?
It’s time to explore a digital travel name. Here is the break down of $ABNB, otherwise known as Airbnb.
Current Price: $173.01
52/Wk High: $219.94
52/Wk Low: $121.50
Market Cap: $108.8 Billion
3 Month Performance: 15.16%
Read below for the break down!
Airbnb ( $ABNB ) is a leading digital travel name that provides customers with a marketplace platform for stays and more, connecting hosts to guests. From full homes to treehouses, Airbnb provides customers with a diverse array of options.
Breaking down the company’s business model, Airbnb’s platform is two-sided; one side allows property owners to list and develop rent, while the other side provides travelers with simplistic and quality staying options.
To generate revenue, Airbnb collects commission from two key sources, booking from guests, and successful transactions from hosts. The company charges guests a 6-12% booking fee, while hosts are charged 3% on every successful transaction.
Airbnb is led by co-founder and chief executive officer (CEO) Brian Chesky, who co-founded the company in 2007. Since then, Chesky has led the company to the success it is now.
Chesky is backed by a reliable management team, with key members boasting experience from the likes of Apple, Liberty Media, Qwest Communications, United Health, Google, Yahoo!, Disney, and Amazon.
In recent news, Airbnb has been caught within the ebbs and flows of the COVID-19 pandemic, trading unfavorably as the cases increased. Luckily, the travel rebound is once again starting to gain traction, with COVID-19 numbers rapidly declining.
In fact, throughout the past 2 ½ weeks new cases have declined to 112,000 cases per day, representing a nearly one-third drop. Furthermore, in just the past week the 7-day moving average of daily new cases declined by 13.3% according to the CDC.
Digging into the numbers Airbnb ( $ABNB ) beat Q2 2021 expectations with an EPS of $-0.11, better than the analyst’s EPS consensus estimate of $-0.47. On a quarter-over-quarter basis, EPS improved significantly from the $-1.95 EPS level in Q1.
On the revenue front, Airbnb delivered $1.3 billion in Q2 2021 revenue, representing a significant 299% year-over-year increase. Although, it is important to note that when compared to Q2 2019, revenue only increased 10%.
Furthermore, gross booking volume (GBV increased by 320% year-over-year from the smaller $3.2 billion in Q2 of 2020. Do note, when compared to the Q2 2019 level, GBV increased by 37%.
While both revenue and GBV improved, Airbnb continued to run a net loss, with the second quarter’s net loss totaling $-68.0 million. The quarter’s net loss is significantly better than the same time 2020 level of $-576 million and the same time 2019 level of $-297 million.
Shifting into EBITDA, adjusted EBITDA totaled $217 million in Q2, representing a significant improvement over the Q2 2020 level of $-397 million and Q2 2019 level of $-43 million.
For newcomers, EBITDA is defined as Earnings Before Interest, Taxes, Depreciation, and Amortization.
Rotating into cash flows, free cash flow (FCF) continued to improve, totaling $784 million in Q2. When compared to the same time 2020 level of $-263 million and Q2 2019 level of $121 million, FCF greatly improved.
Furthermore, net cash provided by operating activities continued to trend upward, totaling $791 million. Compared to the same time 2020 and 2019 levels of $-256 million and $152 million, cash generation by operating activities accelerated.
Exploring booking metrics, nights and experiences booked totaled 83.1 million in Q2, representing 197% growth year-over-year. On the flip side, when compared to Q2 2019, the metric declined by 1%.
Lastly, gross booking value per night and experience booked or ADR for short, totaled $161.45, representing a 41% improvement year-over-year and 38% improvement over the same time 2019 level.
Management was upbeat.
“So to summarize, travel is recovering and our Q2 results show that Airbnb is leading the way. For the past year, we've been preparing for this rebound.”
“We've driven product innovations to support changes to the way people are traveling and living all over the world. And as a result, we've emerged from this crisis faster than others and as a stronger, more efficient company,” CEO Brian Chesky said.
Looking to the future, leadership did not provide guidance but expects the recovery both in travel and company-wide to continue.
Shifting into the balance sheet the numbers are solid.
Total Debt: $1.980 Billion
Total Liabilities: $12.092 Billion
Total Assets: $15.485 Billion
Cash & Short Term Inv: $7.428 Billion
On a valuation basis, Airbnb does trade at a premium.
Forward Price to Earnings: 436.89x
Price to Sales: 23.84x
Price to Book: 31.17x
Price to Free Cash Flow: 72.66x
Given the numbers, the analysts are bullish, with a mean price target of $180.46/share, representing a minimal 4.31% upside.
The high price target is $219.00/share, representing a 26.58% upside, while the low price target was $132.00/share, representing a -23.70% downside.
The big money is less involved with 47% of Airbnb being owned by institutions, top holders include Jennison Associates, Wellington Management Company, and Capital Research Global Investors.
On a technical basis, Airbnb could be presenting an opportunity. According to the six-month charts, the MACD is moving with slight downside momentum within a tight range around 4.69.
The six-month charts are also indicating an RSI of 61.3 and CCI of 85.01, both of which are on the higher end and have been trending upward.
Sifting through investor sentiment the bears believe a high multiple valuation, growing competition, and a still pronounced pandemic are reasons for future downside.
Meanwhile, the bulls believe reliable management, a recovering travel market, a slowing pandemic, and a simplistic platform are reasons to bet on growth.
In short, Airbnb ( $ABNB ) is a solid company with a reliable leadership team, a solid balance sheet, quickly recovering earnings, a leading platform, an efficient business model, and recovering travel industry to expand within.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.