We came across a bullish thesis on Airbnb, Inc. (ABNB) on Disruptive analytics’ Substack by Magnus Ofstad. In this article we will summarize the bulls’ thesis on ABNB. ABNB Technologies, Inc. share was trading at $117.55 as of Sept 16th.
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Airbnb (ABNB) has recently signalled slower revenue growth for the second half of 2024, prompting a revision in growth projections by about 1%. Alongside this, the company’s EBIT margin outlook has been lowered due to stagnant development in its take rate, which justifies the sell-off in the stock following the earnings report. Evaluating platform companies like Airbnb presents a unique challenge, particularly when considering the “optionality value” – the potential for platform companies to pivot from their core business, open new markets, and capture additional revenue streams.
During the recent earnings call, CEO Brian Chesky highlighted several priorities aimed at unlocking this optionality. His top focus is enhancing the hosting platform, specifically making it easier for property managers to connect with homeowners. This strategy mirrors the operations of companies like GuestReady in Dubai, which assist homeowners in managing rentals, thereby increasing supply on the platform by reducing the barriers to hosting. Chesky’s second priority is maximizing the value of the “experiences” segment of Airbnb’s platform, which offers tickets to cultural events and tourist attractions. While Booking.com operates similarly, Airbnb serves a distinct market segment, suggesting room for growth without direct competition.
The third priority Chesky outlined was expanding Airbnb’s involvement in event hosting. During the Paris Olympics, Airbnb offered 150,000 homes, and Chesky sees significant potential in targeting smaller events and conferences to increase both short- and long-term supply on the platform. While these initiatives highlight growth opportunities, pricing in the future value of every potential avenue is a challenge, and the current valuation remains tied to the business as it stands today.
Despite these revisions, Airbnb’s business model remains robust. The company has a solid global presence with over 8 million hosts, and its free cash flow generation is particularly impressive. As one of the most profitable tech companies globally, Airbnb continues to expand its footprint, and its ability to capitalize on future optionality will be crucial to its stock performance. With a fair value estimate of around $120 per share, Airbnb appears undervalued at current levels, but its growth trajectory will depend on its ability to successfully expand beyond its core offerings.
Airbnb, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 63 hedge fund portfolios held ABNB at the end of the second quarter which was 56 in the previous quarter. While we acknowledge the risk and potential of ABNB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ABNB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.