minpaku platform Airbnbs (ABNB 5.96%) Considering it’s down 24% since last year, it might not sound like a money-making stock. However, the stock has already yielded substantial returns to investors this year. Airbnb’s stock has risen 27% since early 2023, and there’s reason to believe it could continue.
Let’s take a closer look at what’s going on with this hot strain and why it may continue to bloom for years to come.
What’s new on Airbnb
Many conditions have weighed on Airbnb since its 2021 initial public offering. First, it went public in one of the most difficult years in history for the travel industry, followed by the 2022 tech crash and bear market. Investor concerns are now heightened about a potential recession and its impact on travel spending. These factors combine to explain why the stock is trading about 50% below its recent high.
But despite these tremendous challenges, Airbnb is doing incredibly well. The company’s most recent third quarter results, which ended in September 2022, reported healthy demand for accommodation, with nightly bookings and prices rising across the board. The company reported highest quarterly earnings before taxes, interest, depreciation and amortization (EBITDA) and increased free cash flow (FCF) by more than 80% year over year.
By any measure, business is booming. The stock price he started to rebound at the end of December, but for no apparent reason. The company has not reported any new earnings or guidance on its performance. My guess is that people are aware of Airbnb’s long-term monetization potential and are taking advantage of the low prices.
2023 may not be as bad for travel as many believe
One of the biggest concerns weighing on Airbnb is declining travel spending. If the U.S. hits a recession in his 2023, bookings and room rates are likely to decline. However, slowdown is not guaranteed. The latest data on travel spending in October show only a slight pullback from the previous month and are still up compared to pre-pandemic levels. Regardless, consumer spending remained strong throughout the holiday season.
Longer stays are also increasing quarter by quarter. The shift to remote work over the last few years has allowed more people to use Airbnb to travel or stay.
Investors should also not overlook the full picture of what Airbnb does. It has completely disrupted the travel industry by offering guests a unique and alternative stay to traditional hotels and bed and breakfasts. The company has over 6 million listings in about 220 countries and territories and continues to grow.
Fourth quarter and full year 2022 earnings provide a clearer picture of the company’s performance, but investors are advised to take a longer-term view of the company’s money-making capabilities. Disruption of Airbnb’s scale is nothing to take lightly, especially for such a young company. It currently trades at around 45x higher earnings than other stocks in the industry, but is fair valued when compared to other popular high-growth tech stocks.
Note that the road to fortune doesn’t often happen in one year.2023 could be a very strong year for the company, especially if travel spending doesn’t slow down as many are expecting But the longer you hold the stock, the greater the money-making opportunities it presents. Airbnb is a very long term stock for me as I know it could take years before its full potential is realized.
