Airbnb – Value matters

It all comes down to the valuation.

• Airbnb has weathered the pandemic with exceptional management execution proving that it is a good company but whether it also is a good stock with an attractive valuation remains to be seen.
• Airbnb has filed its S-1 to go public and its numbers demonstrate decisive and rapid action to combat the impact of the pandemic as well as a surprising recovery in Q3 2020.
• However, with the case count picking up again sharply and restrictions once again on the rise, the outlook for Q4 2020 and Q1 2021 remains very uncertain.
• Gross bookings fell by 32% YoY and 67% YoY in Q1 2020 and Q2 2020 respectively but recovered to decline by just 17% YoY in Q3 2020.
• This may be a mirage as coronaviruses tend to be very seasonal in nature which is why those countries entering the winter months are now experiencing a large uptick in cases.
• The good news is that deaths are not increasing anything like as much but countries are locking down anyway which is likely to have a significant impact on bookings and travel over the next two quarters.
• The outlook for Q2 2021 and beyond is much better because if the mRNA vaccines prove to be as good as billed, then while the virus is in remission during the summer, there is an opportunity for mass vaccination and no repeat of the 2020 winter season.
• This does mean that the influenza virus is likely to make a comeback in Q4 2021 but there appears to be very little public sensitivity to excess deaths caused by influenza and other viruses compared to those caused by SARS-Cov2.
• This will allow Airbnb to get back to more normal business but in a leaner and fitter form with its management tempered by the difficulties of 2020.
• Hence, I would expect that 2020 revenues will be around $3.0 -$3.5bn and that 2021 will offer good growth off the back of this relatively low number.
• Long-distance and international stays have remained very weak but national and short distance visits have been fairly robust which is what is keeping the company going at the moment.
• Long-term stays have also been very resilient as a result of city dwellers seeking places in the country to sit out the pandemic.
• Airbnb has weathered the storm and is well-positioned especially because in its space it remains effectively unopposed.
• As ever, this IPO will come down to valuation.
• I think Airbnb is very well positioned but the immediate term is fraught with risks which will keep a lid on sentiment.
• Hence, if the company is too greedy, I would rather look for a basket of badly beaten up travel websites, hotels and cruise lines as a way of benefitting from the exact same trend that will drive Airbnb for the next year or so.
• I like the fundamentals of this company and the management has proved its metal.
• Let us see if I can like the stock as well.