Buy AirBNB (ABNB) Stock at IPO? Analysis and Long Term Outlook
The most hotly anticipated IPO of the year: AirBNB Stock! I summarize AirBNB's (ABNB) business, their financials, outlook and risks, and answer if I'm going to buy it!
Disclaimer: I am not a financial advisor, any investment commentary are my opinions only.
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Timestamps:
0:00 - Begin
0:57 - Timestamps
1:17 - Overview of AirBNB
1:50 - Gross Booking Value
2:07 - COVID Results + Financials
4:47 - Future Outlook
7:40 - Risks
10:37 - Will I Buy?
12:52 - 4 Free Stocks with WeBull
1. Overview of AirBNB
For those of you who don't know - AirBNB is a network where it connects people that rent out their extra rooms or extra properties to "guests"(customers) who want to book lodging for vacation or tourism purposes.
So isntead of booking a traditional hotel, a guest can book a stay at an AirBNB.
AirBNB then takes a commission from each booking - and they don't actually own any of the listed properties.
2. COVID Results + Financials
In March of 2020, their GBV was down 127% (screenshot 1) compared to the same period int he previous year, but as you can see, the trend continued to recover throughout the next 6 months. In Sept 2020, their Gross Booking Values, year over year, were down 17% - which is not bad considering the global pandemic at hand.
Another resilient bright spot of AirBNB during Covid is that while their revenue went from 3.69 to 2.51 billion, or 32%, they actually cut their sales and marketing expenses 54% - mostly suspended all discretionary spend.
So they basically cut their marketing by more than half, but their revenue didn't suffer proportionally, in fact it dropped disproportionately, which basically means that AirBNB is a bit more resilient than we'd like to think and their brand value carries a lot of weight and value in the space.
3. Future Outlook + Risks
Benefits:
Network Effects
Low/No Competitors
International Expansion
Travel is not a trend
Risks:
Regulation is a big concern.
Incurred losses since inception
Host Quality needs to remain consistent
A host of risk factors that are in and out of ABNB's Control
4. Will I Buy?
My short answer is yes - I'm probably going to buy it. I'm pretty optimistic on AirBNB because they've won the millennial, and soon Gen-Z demographic as the default travel option.
As far as what price to pay, I think their valuation is already somewhat high at 40B, according to all the research I've done, a lot of analysts are putting their price targets to around $65-75 as a fair price to pay per share using comparables against other companies like Booking.com.
I'd argue that if you're holding it for the long term - 5-10 years+, buying it on IPO at somewhat of a reasonable price should be good - this is my OPINION only.
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