Believing in Airbnb
TLDR if the value per share is anywhere under $55 tomorrow, I'll be gobbling up as much as I can, because I expect Airbnb to be better than what most models are projecting them as. Unfortunately it looks like the anticipated share price of 45-50 was bumped up to 55-60 yesterday 12/7. Bummer, as I'd be a buyer all day at the former range.
A lot of this is gut feeling and intuition as opposed to super hardset numbers, but I think Airbnb can be a successful long term company and will be UNDERVALUED which is why I'm planning on throwing quite a bit of my portfolio into ABNB come Thursday, as long as the cap is under 37B.
In the below,, I'm just spewing what most analysts have already noted. I have strong ties to the company so my views are definitely biased, but I do believe that Airbnb will be a longterm high growth stock for the following reasons.
First, it's important to compare Airbnb to two types of competitors- Hotels as well as Bookings. The two segments have significantly different market expectations, and one could argue Airbnb falls in either category.
Pros-
- Low capital intensity (duh)
- Leadershipwise, the 3 founders are extremely cognizant of the purpose of a public company, from non-financial POVs. While it's easy to say these words, my experience at the company proved the weight these concepts carry. I don't take these statements and values lightly, I genuinely think this will be a strong, consistent movement at the company and is not all for PR. While it may not add an extreme amount of financial value, I think more and more retail investors will begin to appreciate the social impact and collaboration of public companies. https://news.airbnb.com/brian-cheskys-open-letter-to-the-airbnb-community-about-building-a-21st-century-company/
- Shortterm- Hotel competitors have suffered during COVID and I have not been impressed with their recovery efforts. Besides promising every room will be deep-cleaned, there isn't much innovation happening. Addly, AHLA has noted that 70%+ of hotels likely won't make it without significant federal assistance. The revenue/marketshare will have to go somewhere. If Middleofnowhere, ME has fewer hotels but a local farm is able to open up its doors, ABNB easily takes that revenue at minimal cost.
- The company has touched profitability (2018) and is on the edge once again.
- The biggest reason I believe ABNB can be successful in the long term is the opportunity in China. I can't dive too much into the numbers, but I believe the fact that Airbnb can compete in China w/ hotel business is overlooked by many in the Tech investment sphere who somewhat ignore the potential of that market due to failures of Uber, Google, Facebook, etc.
- I expect the operating margin to decrease over the next 10yrs to parallel competitors
- I can agree with analysts' general adjustments for distress in probability of failure, I put this at a very low risk.
Cons-
- Airbnb Experiences won't bring large revenue numbers. Incredible idea, Strong execution, but it'll always be a side-business for Airbnb a la UberEats for Uber
- Decreasing growth rate in bookings YOY. This is somewhat expected, though never a welcoming sign.
- 2020 obviously threw a wrench in many projection models, but Airbnb was hurt badly. Bookings through ABNB have come back quickly in the months fater March and April, but Operating Losses 3x'd and Gross Bookings dropped 40% compared to 2019. I have a hard time weighing this in a valuation model but it is what it is.
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Thanks for your perspective! The note about Hotels struggling in the pandemic does seem to be a possible catalyst for Airbnb to increase market share.
Great points!