Will Airbnb channel bull season into summer travel season?

After a couple of years locked up at home, people are ready to travel again. According to research by Deloitte, an astounding 46% of Americans are planning a trip this summer that includes staying in a hotel or similar accommodation. The boom comes after travel demand plummeted due to the pandemic.

The surge will be great news for Airbnb (ABNB -2.53%), which has already seen an eclipse in revenue compared to before the pandemic. But will high summer travel demand be enough to send Airbnb’s stock up? Below we consider its prospects.

Image Source: Getty Images.

Demand for travel this summer is skyrocketing

The growing interest in travel is not only noted by Deloitte researchers. Target There was great news for Airbnb and other travel companies when they noted that luggage sales jumped 50% in the latest quarter. The rebound was expected. Since the outbreak, hotel and resort spending has fallen by a whopping $837 billion in 2020. They jumped $340 billion in 2021, but that still left the industry about $500 billion less than it was before the pandemic.

The recovery looks set to gain momentum in 2022 with more COVID-19 vaccines. Airbnb’s revenue for the latest quarter ending March 31 was 70% higher than the same quarter last year. Moreover, the leading indicators suggest that the momentum may continue. Funds held on behalf of customers reached $6.1 billion, up more than 50% from the same period the previous year when Airbnb held $4 billion. This metric measures the value of booked but not yet completed bookings.

ABNB Revenue Chart (Quarterly)

ABNB earnings data (quarterly) from YCharts.

Indeed, management noted that as of April, 30% more nights were booked for the summer tourist season than in 2019, with the rest of the year looking even better than summer. Here are more details from the company in its Q1 letter to shareholders:

Ahead of the peak travel season in the third quarter of 2022, we are seeing significant demand for the summer months of travel across Europe, the Middle East and Africa. [Europe, Middle East, Asia]and North America. We are also seeing higher-than-historic demand for Q4, indicating that consumer confidence in travel remains strong beyond the summer months.

Airbnb deals cheaper than ever

Chart of ABNB Price Movement to Free Cash Flow

ABNB price to free cash flow data from YCharts.

So the outlook for Airbnb is excellent as travel around the world recovers, but that doesn’t necessarily mean it will boost stocks. The company is trading at a price to free cash flow ratio of 27 and a price to sales ratio of 11. It may be cheaper than ever and its future looks so bright that the disconnect is bewildering.

However, investors can buy Airbnb shares at these bargain prices and wait patiently for a surge in travel demand to boost its earnings and profits. Stocks may not rebound any time soon, but they will likely be higher in three to five years than they are today.

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