Vacation-sharing platform Airbnb stock (NASDAQ: ABNB) has seen its stock price decline by about 9% over the last month, roughly tracking the decline in the broader Nasdaq-100. There have been mounting concerns about the economy with U.S. GDP contracting over the last two quarters and things could remain challenging as the Federal Reserve continues to hike interest rates (it carried out a 0.75% rate hike last week) as it looks to rein in stubbornly high inflation. Airbnb has taken a hit, considering that it is a high-growth, high multiple stock that is very dependent on discretionary spending.
However, Airbnb’s business has actually performed quite well in recent quarters despite the mounting economic headwinds. For example, in Q2, Airbnb’s revenue rose by 58% versus last year to $2.1 billion, and nights and experiences booked rose by about 25% versus last year to 103.7 million, making it the strongest quarter on record. Airbnb’s business also shows potential for considerable profits, with net profits standing at $379 million, compared to a loss of $68 million in the year-ago quarter. The company has also generated $2.9 billion in free cash flows over the last 12 months, with its total cash balance standing at nearly $10 billion. Airbnb also says that it will repurchase about $2 billion in stock, indicating that it is increasingly confident about its long-term cash flow outlook.
Overall we think the stock is a good bet at current levels. Based on the after-hours price of about $103 per share, Airbnb currently trades at under 8x projected 2022 revenues, well below the 20x multiples it traded at its peak in 2021. There are some risks as well. The company is very dependent on leisure travel compared to rival online travel players who have exposure to business travel as well, and this could make Airbnb vulnerable as people could scale back on discretionary spending further if the economy continues to deteriorate. That said, the company’s asset-light model and lower rates versus hotel rooms could prove to be a redeeming factor. We value Airbnb stock at about $145 per share. Our price estimate is about 40% ahead of the current market price. See our interactive analysis on Airbnb Valuation: Expensive Or Cheap? for more details. See our dashboard on Airbnb Revenue for an overview of Airbnb’s business model and how its revenues are likely to trend.
|S&P 500 Return||-8%||-23%||63%|
|Trefis Multi-Strategy Portfolio||-12%||-26%||193%|
 Month-to-date and year-to-date as of 9/27/2022
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