Is Now The Time To Pile Into Airbnb (NASDAQ: ABNB)

Like many red hot tech companies that have IPO’d in recent years, Airbnb (NASDAQ: ABNB) has had its fair share of turbulence already. In the immediate aftermath of their IPO in December of last year, their shares dropped 25% before the bulls stepped in and sent them up 80%. Keep in mind, the decision to go public and the initial few months of trading were both made and done in the shadow of the COVID pandemic which wreaked havoc on Airbnb’s bank account. But the fact that they pushed ahead with the move reflects a level of confidence from senior management that hasn’t always been mirrored by their investors. 
Coming towards the end of this past summer, the stock had fallen some 40% from February’s high and you’d have been forgiven for thinking Airbnb was on the verge of becoming the latest incarnation of the tech industry’s Icarus, who flew too close to the sun. But in recent weeks, shares seem to have put in a low, via a strong-looking double bottom, and have been trending steadily northwards. For those of us on the sidelines, there are more than a few reasons to think this could be the start of something bigger and longer lasting. 

Fresh Upgrade

Yesterday’s 3.6% jump came off the back of a fresh upgrade from the folks over at Cowen, who moved their rating on the stock from Market Perform to Outperform. They’re expecting the “the dynamic of an alternative in lodging mix to be a permanent trend” and the good news is that Airbnb is noted to be synonymous with the hotel-to-homes lodging shift. In addition, they feel that Street estimates on Airbnb are also underestimating the true potential with a mark for 17% bookings growth in 2022. 

This fresh upgrade should provide a solid counterweight to last month’s downgrade from Goldman Sachs, which is surely acting as a drag on any near-term upside. The Goldman team initiated coverage this time last month and gave shares a bearish price target of $132. Analyst Eric Sheridan and team felt that Airbnb investors were “already factoring in a huge travel burst from a more flexible work environment in the future.” The main risk that Airbnb has to deal with now is if that work from the road scenario does not play out. But based on the past couple of weeks, investors and Wall Street alike are starting to believe that it will.

The company’s most recent booking trends, released in August’s Q2 earnings report, have a strong rebound from 2020 showing no signs of slowing down. Gross booking value hit $13.4 billion, well ahead of the $11.2 billion analysts had expected, and an impressive 30% higher than the same number from Q1. That was nothing compared to the year-on-year figures, which showed revenue up about 300% compared to the same period last year, a jump which went a long way to shifting the company’s bottom line back towards the black.

Getting Involved.

We’ll hopefully see a reversal from the Goldman team in the coming weeks, particularly if shares can continue to build up some steam. If that weight were to be lifted, there’s every reason to think they could get back towards the $200 level they were just starting to get used to at the beginning of the year. Aftershocks from the COVID pandemic will undoubtedly come and go, but all the signs are pointing towards the world and society becoming more and more comfortable living with it. That means people will continue to take holidays and adapt their working situation to fit the environment, and Airbnb is well-positioned to capitalize on both these trends. 

Their Q3 earnings are due before the end of November and will give us a clear line of sight to both current and expected bookings trends. Unless we’re hit with fresh lockdowns in the meantime, it’s fair to expect those numbers to confirm that Airbnb is back on track and potentially within range of reporting a profit.