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Down 48%, This Beaten-Down Travel Stock Is a Fantastic Long-Term Hold

Airbnb (ABNB -1.42%) struggled at the pandemic’s onset. Suddenly, travel demand slowed considerably. To make matters worse, folks started canceling existing trips they had already booked on the platform. Not surprisingly, Airbnb’s revenue fell by 30% in 2020.

However, the company has been rebounding — growing revenue, increasing reservations, and improving profits since then. Fortunately for investors, Airbnb’s stock is down 48% off its highs, making it an excellent time to buy and hold for the long term.

A family unloading luggage from a car.

Image source: Getty Images.

Airbnb is bouncing back stronger than ever 

In its first-quarter shareholder letter, Airbnb management noted that two years into the pandemic, Airbnb is substantially stronger than ever before. The numbers support the statement. Revenue in the quarter ended on March 31 rose by 70% from the same quarter in 2021, but more importantly, it was 80% higher than in the same quarter in 2019.

ABNB Revenue (Quarterly) Chart

ABNB Revenue (Quarterly) data by YCharts.

Similarly, gross booking value increased by 67% from the same quarter of the prior year and 73% from the same quarter in 2019. With the pandemic far from over, it’s impressive that Airbnb is achieving this magnitude of growth. As a reminder, Airbnb does not own the properties listed on its platform. Its task is to bring together hosts and travelers and encourages transactions between them. For its services, Airbnb takes a percentage of the gross booking value.

That business model is working in its favor as it is more flexible than traditional hotels and resorts. If Airbnb’s hosts observe that demand is surging in their area, they can work to increase supply by listing their properties more often and even creating new listings. For instance, hosts who typically rent a spare room in their home could convert the garage into a space they can list on Airbnb if the business is booming. That’s precisely what’s happening right now. Airbnb noted that supply is increasing in the regions with the fastest-growing demand. 

What’s more, the pandemic created a new paradigm that could benefit Airbnb in the long term. Remote working has become substantially more common since the outbreak. If you are not stuck to a single location because it is necessary to be close to the office, you can travel more often. Work from San Diego one month, Los Angeles another, and San Fransico after that. Tired of California? Work from Miami, then Orlando. Sure, this nomadic lifestyle is not for everyone, but many desire the freedom to choose. Indeed, Airbnb highlighted that long-term stays of 28 days or more are its fastest-growing category, more than doubling in size from Q1 2019.

Airbnb’s prospects have improved, and its price has fallen

ABNB Cash from Operations (Quarterly) Chart

ABNB Cash from Operations (Quarterly) data by YCharts.

The rebound in travel and changes that Airbnb made at the pandemic’s onset have also improved profitability. For the first time in its history, Airbnb reported positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). At $229 million in Q1 2022, it was an improvement over the adjusted EBITDA loss of $59 million in the same quarter last year and the $248 million loss in the metric in Q1 2019. That trend has boosted Airbnb’s cash flow from operations, as shown in the chart above.

ABNB Price to Free Cash Flow Chart

ABNB Price to Free Cash Flow data by YCharts.

Several metrics for Airbnb are moving higher, but one is noticeably moving lower, and that is its valuation. Despite its impressive prospects, Airbnb’s stock has been caught up in the broad market sell-off, and that has created an excellent opportunity for investors to buy at near its lowest prices ever. 




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