1) Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 63
Airbnb, Inc. (NASDAQ:ABNB) operates an online marketplace for travel and booking services. The company provides lodging, homestay, and tourism services.
The company is expected to be supported by its strong network effects. Experts believe that Airbnb, Inc. (NASDAQ:ABNB)’s network has reached a critical mass scale, thanks to its healthy booking share of the alternative accommodation market along with ongoing expansion into experiences. Over the coming years, the company’s network advantage will be supplemented by artificial intelligence investment and further expansion into the experiences vertical and global markets. Also, the company appears to be well-positioned to benefit from the shift to mobile bookings.
Moreover, Airbnb, Inc. (NASDAQ:ABNB) should be aided by its unique asset-light business model, which is less common in the travel industry. This is because the company does not own or operate the stays listed on its platform. Even though travel spending remains a cyclical business, the consistent consumer spending category over the long term should continue to support Airbnb, Inc. (NASDAQ:ABNB). The company also has strong financial health, courtesy of its prudent management of finances, which is demonstrated by the higher cash reserves as compared to its liabilities.
As per Wall Street analysts, the shares of Airbnb, Inc. (NASDAQ:ABNB) have an average price target of $126.65. In the second quarter, 63 hedge funds held positions in the stock, totalling $2.61 billion.
Polen Capital, an investment management company, released its first-quarter 2024 investor letter and mentioned Airbnb, Inc. (NASDAQ:ABNB). Here is what the fund said:
“During the quarter, we initiated new positions in Sage Group and Airbnb, Inc. (NASDAQ:ABNB) and added to our existing position in Globant.
Airbnb is a great business model, according to our research, due to its two-sided global network effects. For several reasons, Airbnb has a better mousetrap with its supply growth engine, with its hosts having a far lower cost of capital and more flexibility than hotels. We think private rentals should continue to grow their share of overall accommodation stays, potentially up to 30% of lodging or higher over the long term, letting the private rental gross booking value grow at a low double-digit rate. We also think Airbnb should continue to gain share within the private rental market as its global network effects strengthen, allowing for mid-teens revenue growth. With flat to rising margins over time, significant free cash flow generation, and a management team that has demonstrated its owner orientation, this should result in high-teens EPS growth over time. While the path there will not be linear, and it is a more discretionary spending-tied business, we think the long-term secular growth opportunity is very compelling.”
While we acknowledge the potential of ABNB as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than the ones mentioned on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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