Buying ABNB at a Discount? You Are Getting Paid to Do It
At about $140.07 a share, Airbnb (ABNB) is trading about 13% below its 52W high.
Do you think ABNB stock is a good long-term bet at current levels? What about at a 30% discount at about $100 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.3% annualized yield at 30% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 1/15/2027, with a strike price of $100
- Collect roughly $434 in premium per contract (each contract represents 100 shares)
- That’s about 4.3% annualized yield on the $10,000 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.3%
- And you give yourself a chance to buy ABNB stock at deep discounted price of $100
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| ABNB stays above $100 | You keep the full $434 premium – 4.3% extra income over the next 367 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| ABNB closes below $100 | You’ll be obligated to buy 100 shares at $100. But thanks to $434 premium, your effective cost basis is just $95.66 per share – a roughly 32% from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
First, you want fundamentals to check out. For details, see Buy or Sell ABNB Stock or check Airbnb Investment Highlights
Second, you want to better understand competitive advantage and industry tailwinds. Below is what specifically gives us the conviction.
Why Hold ABNB Stock Long-Term
Airbnb’s wide moat, driven by its powerful network effect and brand, combined with the strong secular tailwinds of changing travel preferences and remote work, positions it for long-term growth. The company is highly profitable, generates significant free cash flow, and maintains a robust balance sheet. Even if the stock price were to fall and we were assigned shares, the fundamental strength of the business makes it an attractive long-term holding with the potential for significant capital appreciation.
Competitive Advantage
We classify ABNB’s economic moat as WIDE, with the primary source being Network Effect
- Airbnb’s shift to a host-only fee structure in many regions, which can increase the total price displayed to guests, has been met with an increase in bookings, suggesting strong demand inelasticity.
- The term ‘Airbnb’ is widely used as a verb, indicating dominant mindshare and brand recognition in the short-term rental industry.
- Despite the presence of competitors like Booking.com and Vrbo, Airbnb continues to gain market share in the vacation rental sector.
- The platform benefits from a massive two-sided network effect, with over 7 million active listings and millions of guests, making it difficult for new entrants to compete at the same scale.
See Airbnb Full Analysis.
Industry Tailwind
The industry tailwind is STRONG, with CAGR projection of 11.4% (Source: Grand View Research)
Secular Trend: Shift to experiential travel and flexible work arrangements (digital nomads).
Key Risks: Increasingly strict regulations in major cities, which could limit the supply of listings and increase compliance costs.
Financial Guardrails
Cash Generation: Positive Free Cash Flow
Balance Sheet: As of the most recent reports, Airbnb has a strong net cash position with billions in cash and cash equivalents and relatively low debt, indicating a very low bankruptcy risk.
Not comfortable with options or stock-specific trades? PORTFOLIOS are even better.
Why Stock Pickers Win More With Multi Asset Portfolios
Individual picks are volatile but diversified assets offset each other. A multi asset portfolio helps you stay the course capture upside and reduce downside.
The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices