We came across a bullish thesis on Airbnb, Inc. (ABNB) on Substack by Summit Stocks. In this article, we will summarize the bulls’ thesis on ABNB. Airbnb, Inc. (ABNB)’s share was trading at $133.07 as of Jan 21st. ABNB’s trailing and forward P/E were 46.20 and 28.99 respectively according to Yahoo Finance.
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Airbnb, the world’s largest alternative accommodation platform, connects travelers with a diverse range of over 8 million unique stays across the globe. Founded in 2007, the company operates a two-sided network where hosts benefit from tools like pricing guidance and listing optimization, while guests enjoy authentic, user-friendly travel experiences. With a gross booking value of nearly $80 billion and margins approaching 40%, Airbnb has evolved its offerings over the years, including features like curated wishlists, split stays, and pricing transparency. Despite its scale and profitability, the company’s stock has struggled, leading to concerns about its valuation and competitive positioning. However, as it heads into 2025, Airbnb’s stock has reached a more reasonable valuation, presenting an attractive investment opportunity.
The company is focused on three major growth areas: scaling its core business, expanding geographically, and diversifying beyond travel. Airbnb has already booked nearly 500 million room nights annually, with the potential to reach 1 billion by improving quality and capturing a larger share of the hotel-dominated market. Geographic expansion is another key growth driver, with Airbnb targeting emerging and underpenetrated markets like Mexico, Brazil, India, China, and others. The company envisions becoming a global leader in accommodations, reaching customers in more regions worldwide.
The most transformative opportunity for Airbnb lies in diversifying beyond short-term rentals. CEO Brian Chesky compares this journey to Amazon’s transition from bookseller to tech giant, with Airbnb planning to launch one to two new businesses annually, each targeting over $1 billion in incremental revenue. While specifics are yet to be revealed, these new ventures will focus on adjacent travel markets before potentially expanding further in the years ahead.
Despite these promising plans, the company’s stock valuation remains crucial. Adjusting for stock-based compensation and considering Airbnb’s 2023 results, which were temporarily boosted by a tax benefit, long-term free cash flow projections remain strong. Conservative assumptions about revenue growth and operating margins suggest substantial returns even in a cautious scenario. This indicates a potential annual return of 9% in the worst case and 11% in the base case.
However, Airbnb’s stock struggles have been influenced by overvaluation at its IPO and ongoing regulatory pressures. While the company has adjusted to these challenges, including working with governments on short-term rental policies, regulatory risks remain a concern. Additionally, Airbnb faces competition from major players like Booking Holdings and Expedia, as well as metasearch platforms and hotel chains. Despite these challenges, Airbnb’s brand recognition, scale, and profitability reinforce its long-term potential. With its strong fundamentals, the company remains well-positioned for growth, offering a compelling investment case even amid recent market skepticism.
Airbnb, Inc. (ABNB) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 54 hedge fund portfolios held ABNB at the end of the third quarter which was 63 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.