Airbnb (NASDAQ:ABNB) went public at the end of 2020. It had the usual choppy first few weeks, especially considering the environment and timing that this travel-focused company decided to list. However, 2021 has started in a much more positive way. The Airbnb share price is up 28% since the start of the year. Tomorrow it announces its first trading results as a public company. With plenty going on in the market at the moment, could this be a growth stock that I should look to buy?
The brief back story
Airbnb is a US-based (and US-listed) property marketplace that allows users to book accommodation around the world. The business started in 2008, but has since revolutionised the holiday and business rental market. The ease with which someone can list their space (be it a bedroom, flat, even a treehouse) for booking is attractive, as is the booking process. With a high focus on technology, Airbnb grew quickly over the past decade.
As with other early stage growth companies, Airbnb was loss-making for several years. It eventually turned profitable in 2016, but hasn’t maintained profitability since. As a private company, the market couldn’t value Airbnb via the share price. Therefore, internal funding rounds happened at various different valuations over the years. In April last year, $1bn was raised with a valuation of $26bn, down from a $31bn valuation in 2017.
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Airbnb pushed back going public due to the pandemic impact. With a lack of reporting requirements, I can’t accurately say how much revenue or bookings fell during last year. However, it’s definite that it was significant, with the firm having to cut its workforce by 1,900 employees.
Is the Airbnb share price on the up?
The issues of last year are not beyond us. I’d imagine it will likely report underwhelming figures tomorrow on all fronts. However, I’d also expect a positive outlook for 2021, based on a global economic recovery and vaccine rollout. The easing of lockdown has already begun in some countries, with the UK looking to be open by June.
Given this outlook, I do think the Airbnb share price could offer good value. If we see a dip on results tomorrow, I’d look to buy the shares to hold for the long term. I think the share price could mirror the bounce-back that we should see in airline shares and other travel stocks. If more people are flying and travelling, more people need accommodation.
The concern I have with the Airbnb share price is the already generous market capitalisation. It sits at $112bn, with the share price around $187. For comparison, Booking Holdings (the main competitor) has a market value of $96bn, having been listed for decades. Maybe investors are already pricing in a bumper year for Airbnb. In other words, the 28% rise since the start of the year may mean that the ship has already sailed. If I already held the shares and expected a surge, I might be disappointed.
Ultimately, I think a lot will depend on the tone of the results tomorrow. Therefore, I’m going to wait for them to be released and make a judgement call then. I’m ready to buy if we see a share price drop.
