SHOULD YOU BUY AIRBNB STOCK?
With Airbnb pulling back ever so slightly since reaching a market cap of $100B, I’m beginning to reconsider the stock! Here are my pro’s and con’s 👇
⚡ WHY I'M INTERESTED
Airbnb is disrupting the holiday rental industry (Reported to be worth around $1 Trillion) and has quickly become one of the 𝗟𝗘𝗔𝗗𝗘𝗥𝗦 in this sector! Airbnb's reported revenue and customer growth also suggests that they will continue to 𝗚𝗔𝗜𝗡 𝗠𝗔𝗥𝗞𝗘𝗧 𝗦𝗛𝗔𝗥𝗘 from their peers.
It’s not just the holiday and hotel sector that Airbnb is going after! As international travel stopped because of the pandemic, Airbnb has accelerated it’s push into "𝗟𝗢𝗡𝗚-𝗧𝗘𝗥𝗠 𝗦𝗧𝗔𝗬𝗦". This category connects users with accommodation that is available for 1-3 months and moves Airbnb a step closer to disrupting the traditional 𝗛𝗢𝗠𝗘 𝗥𝗘𝗡𝗧𝗔𝗟 𝗠𝗔𝗥𝗞𝗘𝗧!
With estate agents ripe for replacement, I think that Airbnb has an 𝗘𝗡𝗢𝗥𝗠𝗢𝗨𝗦 𝗢𝗣𝗣𝗢𝗥𝗧𝗨𝗡𝗜𝗧𝗬 to dramatically increase its total addressable market by expanding on it’s short term travel offering with long term property rentals.
Lastly, Airbnb is increasingly adding more services to its platform beyond merely a place to stay! The company is transforming its platform into an 𝗘𝗡𝗧𝗜𝗥𝗘 𝗠𝗔𝗥𝗞𝗘𝗧𝗣𝗟𝗔𝗖𝗘 where customers can now book local tours, events, restaurants & more!
⚡ WHY I'M CONCERNED
Despite a valuation of $18bn in their last funding round, Airbnb announced that they would be pricing shares between $44-50. This gave the company a market cap of $26-30 billion which seemed like a 𝗚𝗢𝗢𝗗 𝗢𝗣𝗣𝗢𝗥𝗧𝗨𝗡𝗜𝗧𝗬 for investors. Unfortunately, the stock eventually opened up at $146... 3 times that 𝗜𝗡𝗜𝗧𝗜𝗔𝗟 𝗩𝗔𝗟𝗨𝗔𝗧𝗜𝗢𝗡 and quickly reached a $100b market cap. Other tech IPO's also performed well this year 👇
Airbnb now has the same market cap as competitor Booking.com despite turning over and earning 𝗔 𝗙𝗥𝗔𝗖𝗧𝗜𝗢𝗡 of their larger rival. Although I think Airbnb could 1 day surpass its competitor, the price of both stocks seem to already reflect this. Also, as much as I love Airbnb (I’ve used the platform for almost 10 years now), I’m not 100% certain that they are safe from their 𝗥𝗜𝗩𝗔𝗟𝗦.
I have seen a clear improvement in the likes of Booking.com (BKNG) recently and it’s clear that they are pivoting in a bid to 𝗘𝗠𝗨𝗟𝗔𝗧𝗘 Airbnb’s business model. This attempt may be futile in much the same way retailers were 𝗧𝗢𝗢 𝗟𝗔𝗧𝗘
to respond to Amazon. Yet, there’s a chance that Booking will do to Airbnb what FB has done to competing social media platforms… Copy them, then use their superior finances & network to 𝗖𝗥𝗨𝗦𝗛 𝗧𝗛𝗘 𝗖𝗢𝗠𝗣𝗘𝗧𝗜𝗧𝗜𝗢𝗡. Airbnb is now big enough that I doubt their rivals can "crush" them, however we will soon see how big Airbnb's moat really is.
Lastly, not only is Airbnb very pricey compared to their industry peers, the stock is very 𝗘𝗫𝗣𝗘𝗡𝗦𝗜𝗩𝗘 full stop! In fact, only Snowflake, Lemonade & Virgin Galactic are more expensive than Airbnb on a 𝗣𝗥𝗜𝗖𝗘-𝗧𝗢-𝗦𝗔𝗟𝗘𝗦 𝗥𝗔𝗧𝗜𝗢 (as seen below).
Not only that, but these 3 companies are growing their revenue between 4-10x faster than Airbnb. Therefore, if all 4 of these stocks perform similarly over the next couple of years, Airbnb could well become the most 𝗢𝗩𝗘𝗥-𝗣𝗥𝗜𝗖𝗘𝗗 stock on the market. That’s the kind of title that can spark a huge sell-off… And if it does 𝗜'𝗟𝗟 𝗕𝗘 𝗪𝗔𝗜𝗧𝗜𝗡𝗚.
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