Airbnb Looks Set to Recapture Old Highs as Stock Price Rebounds from Latest Travel Fears

It’s certainly been a bumpy journey for Airbnb ABNB since its late 2020 arrival on the NASDAQ. In its opening two months, ABNB soared 52.73% to highs of $212.68 - an impressive feat during a pandemic that’s been unmatched in scale for 100 years. 

However, the specter of Covid-19 has impacted Airbnb’s performance for the months that followed. The stock fell by more than 40% in the midst of a summer punctuated by travel disruption. 

November 2021 saw ABNB breach the $200 USD mark for the first time in eight months before news of the Omicron variant of Covid-19 saw the online lodging marketplace’s stock take a tumble. Another attempted recovery in February was quickly quashed by Russia’s invasion of Ukraine, and fears over European tourism as a result. 

As ABNB’s YTD performance shows, the stock has undergone some wild price swings. 

There have been many false dawns associated with ABNB, but could its latest recovery signal the start of a return to form for a company that’s been struggling to shake off uncertainty surrounding multiple factors related to the pandemic, geopolitics, and even inflation? 

Expertly Navigating a Geopolitical Crisis

Airbnb’s response to the conflict in Ukraine was excellent. Stocks in the company fell as the war with Russia intensified - despite neither Russia nor Ukraine ranking high among Airbnb’s most busy tourist destinations. 

However, the conflict inadvertently shone a light on some of the great humanitarian qualities of Airbnb. Firstly, the company set up a goal of hosting 100,000 Ukrainian refugees, and Airbnb also used its platform to help individuals in other emergency scenarios - like helping to connect health workers with hosts during the pandemic. 

Airbnb also became an unlikely hub for charitable donations to be sent to Ukrainian hosts as a means of showing support to their cause - which has opened up another avenue for aid to the country. 

As Maxim Manturov notes, Airbnb’s ethical and positive response to the horrific events in Ukraine has become typical of a company that appears to perform well despite large-scale industry disruptions of late. 

“Despite the pandemic, the company was successful, posting the highest revenue and net profit ever recorded in the third quarter. Although city or cross-border itineraries have yet to return to pre-pandemic levels, CFO Dave Stephenson is hopeful that current travel trends will continue until 2022,” said Manturov, who’s head of investment advice at Freedom Finance Europe - before adding that his target price, prior to the conflict in Ukraine would’ve been “at $195 (about 26% upside).”

These swift responses to downturns mean that the new few quarters could see Airbnb catch strong tailwinds from the return of consumer mobility and a comprehensive easing of restrictions as the threat of Covid-19 weakens. 

At present, the service offered by Airbnb is largely unparalleled and acts as an essential alternative to the one-size-fits-all structures offered by hotels and holiday resorts. 

The gross booking value on Airbnb has climbed by 23% in 2021, as opposed to 2019, illustrating that more holidaymakers are turning to the platform to find bespoke holidays, and not necessarily cheaper alternatives. 

This can all be great news for Airbnb stock, which is set to grow exponentially should consumer appetite remain uncontested. 

Buyer Beware

Despite a relatively promising rebound in the wake of its latest dip, not everyone is ready to believe that Airbnb is set for exponential growth. 

Writing for Forbes, David Trainer believes that Airbnb’s cash flow is unsustainable, and could lead to a downside of as much as 66% if market conditions fail to live up to expectations in the coming months. 

“Despite lower operating expenses as a percent of revenue in 2021 (compared to both 2019 and 2020), Airbnb still burned through $1.6 billion in free cash flow (FCF) in 2021. Over the past three years, Airbnb burned a cumulative $10.4 billion in FCF,” Trainer explains. 

Tellingly, in Airbnb’s shareholder letter for Q4 2021, management recommends indexing 2022’s growth to 2019 - as opposed to 2021. This indicates that even the company itself believes that the relatively strong stock performance over the past year was an exceptional event, and that it’s unlikely to be repeated on quite the same scale despite a more vibrant holiday season on the way. 

Despite some very valid reasons for caution amongst investors, it’s still worth acknowledging that Airbnb’s stock has managed to hold its own within an industry that’s been heavily impacted by a number of drawbacks relating to the pandemic, inflation, and geopolitical tensions. Whilst these three troubling disruptions are still very much active, we can expect Airbnb to see considerably more custom over the next two quarters. 

Following the past two years of lockdowns and social isolation, consumer appetite for holidays is likely to be insatiable in 2022. There’s little doubting that Airbnb will be at the forefront of a key holiday season. With this in mind, Q2 and Q3 will be significant months in charting the trajectory of ABNB.