Is Airbnb Stock Worth A Look After Solid Q4?

ABNB: Airbnb logo

Vacation-sharing platform Airbnb stock  (NASDAQ: ABNB) posted a stronger-than-expected set of Q4 results, as the travel market remained robust despite some signs of macroeconomic headwinds. The stock rallied by almost 9% following the earnings report, trading at about $132 per share after market hours. The company reported revenue of $1.9 billion, up 24% year-over-year and ahead of the upper end of its guidance. Profits were also well ahead of consensus estimates, coming in at $0.48 per share. Overall nights and experiences booked were up 20% to 88.2 million, as more people traveled to cities, which are typically Airbnb’s strongest locations. Cross-border travel has also picked up with nights booked up 49%. That said, the company’s average daily rates declined by 1% from a year ago to $153 per night in the fourth quarter, largely due to currency effects and the strong U.S. dollar.

So is Airbnb stock a buy at current levels? At the current market price, the stock currently trades at about 9x projected 2023 revenues. While this is not exactly a low valuation in a rising interest rate environment, it remains well below the 20x multiples it traded at its peak in 2021. The number falls to about 8x if we exclude the company’s net cash position of over $7.5 billion. Moreover, Airbnb’s business is also emerging to be solidly profitable. Net income margins for Q4 stood at 17%, up from 4% in Q4 2021 and this metric is only likely to get better next year as Airbnb has been growing its marketing-related costs at a slower pace compared to revenues given its strong brand. Free cash flows over the last fiscal year stood at $3.4 billion, translating into a free cash flow margin of a solid 40%.

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That said, there are risks as well. There are concerns as to whether Airbnb can continue to sign on hosts with quality properties. While the company ended 2022 with 6.6 million active listings, marking an increase of 16% versus last year, it remains to be seen if it can keep adding properties at sought-after locations. There are also some concerns about the global economy, with interest rates on the rise. Although Airbnb’s asset-light model and lower rates versus hotel rooms could prove to be a redeeming factor through an economic downturn, the company will nevertheless be vulnerable. We value Airbnb stock at about $140 per share, which is slightly ahead of the 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.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Feb 2023
MTD [1]
YTD [1]
Total [2]
 ABNB Return 9% 41% -18%
 S&P 500 Return 1% 8% 85%
 Trefis Multi-Strategy Portfolio 0% 12% 252%

[1] Month-to-date and year-to-date as of 2/15/2023
[2] Cumulative total returns since the end of 2016

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