After publishing a great set of Q2 2021 earnings, Airbnb saw its revenue increase by approximately 4x what it was last year, to $1.34 billion. Not only were the underlying trends for Airbnb strong, but the daily rates for bookings were also up by more than 40%.
There remains, however, overshadowing concerns that the COVID-19 cases could be impacting the organisation’s performance.
With the delta variant still rapidly spreading, Airbnb has said that their Q4 performance depends significantly on the vaccination programme and the containment of these infectious COVID-19 variants.
Despite the virus surge, we believe that Airbnb is in a better position in comparison to the hotel industry.
The majority of people are more likely to opt for less populated areas when planning lengthier stays.
The Airbnb inventory is also more likely to cater for social distancing in contrast to hotels which often have many communal areas.
Investors are bracing for a big upcycle within the hotel industry as the Airbnb stock is around $160 per share, which is approximately 8% ahead of the current market price.
While there are cheaper, alternative ways to go about the vacation rental business (Vrbo and Expedia), we believe that Airbnb’s brand remains a top pick with potential for growth.
Despite this, Airbnb stock may look expensive to a few investors as there are cheaper ways to face the travel book.
For instance, Expedia, an online travel major, who also owns Vrbo, a vacation rental business, is valued at approximately $25 billion.
And, Expedia’s growth rates are also predicted to be similar to Airbnb’s and are likely to turn into a profit, unlike Airbnb who still remains in the red.
Airbnb unveiled some incredible upgrades to its platform as it begins to prepare for, in their words, ‘the biggest travel rebound in a century’.
These improvements include increased flexibility in searching for destinations and booking dates and an easier onboarding process.
For this reason, while Airbnb stock is a little bit overvalued at its current price, the risk to reward of the company has definitely improved.