Airbnb, Inc.

ABNB Details

Airbnb, Inc. (NASDAQ: ABNB) operates a platform for stays and experiences which connects hosts and guests online or through mobile devices to book spaces and experiences. It assists hosts throughout the listing process and provides them with a suite of tools to manage the listings, such as scheduling, merchandising, integrated payments, community support, host protections, pricing recommendations and feedback from reviews. The platform for guests enables customizable wish lists, in-application guest-to-host messaging, and a way to leave reviews. The company derives the majority of its revenues from U.S. ABNB was listed on the NASDAQ on December 10, 2020. As of July 26, 2021, the company’s market capitalization stood at USD 84.39 billion.

Improving Efficiency: On April 28, 2021, ABNB announced a partnership with Visa, a leading digital payment provider, to enable faster payments to hosts. With the partnership in effect, Airbnb Hosts now have the option to transfer their money from ABNB to their bank accounts associated with an eligible Visa debit card via Visa Direct, a real-time push payments platform.

Q1FY21 Results: The company reported a 5.36% growth in net revenue to USD 886.94 million in Q1FY21 (ended March 31, 2021) compared to USD 841.83 million in Q1FY20, attributable to higher Average Daily Rates (ADRs) offset by decline in the number of bookings owing to the COVID-19 pandemic. Net loss for the company contracted by USD 831.61 million to USD 340.61 million in Q1FY21 vs. USD 1,172.21 million in Q1FY20. As of March 31, 2021, the company had a cash balance of USD 6,569.31 million and long-term debt of USD 1,979.40 million. 

Key Risks: ABNB operates in the hospitality industry, which suffered a huge hit due to the outbreak of the COVID-19 pandemic. The imposition of lockdowns and travel restrictions to prevent its spread led to a sharp decline in global commercial activity across the industry. Should this declining trend continue, it will impact the discretionary spending of consumers on travel and leisure activities, which in turn could harm the financials of the company. In addition, ~50% of the company’s revenue in FY20 was in currencies other than USD, thus exposing it to currency fluctuations. However, to mitigate the exchange rate risk, ABNB started entering into foreign currency derivative contracts. While the derivative contracts reduce this risk, they do not eliminate the financial impact of movements in exchange rate entirely.

Outlook: In its shareholder’s letter, the company outlined that in Q2FY21, it expects a positive momentum of recovery experienced in Q1FY21 to be partially offset by the continued uncertainty of travel restrictions and lockdowns in the EMEA region. It also stated that the ‘Nights and Experiences Booked’ in Q2FY21 will be significantly higher than the highly depressed levels of Q2FY20, but below that of Q2FY19.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ABNB Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ABNB stock price has decreased 5.12% and 18.80% in the past 1 and 3 months, respectively, and is currently leaning towards the lower band of the 52-week range of USD 121.50 to USD 219.94. The stock is currently trading below its 50 DMA level, and its RSI Index is 48.23. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 152.07. Considering the correction in the stock price, decent fundamentals, positive outlook, and associated risks, we recommend a “Hold” rating on the stock at the closing price of USD 142.0, up 2.36% as of July 26, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.