After starting the week mixed, better than expected earnings results from major retailers Walmart (WMT) and Home Depot (HD) helped boost stocks. Inflation fears are weighing heavy on investor sentiment as stocks hover near record highs. Volatility could pick up as we round the corner into 2022.
Today we’re highlighting a stock that’s been on the rise as favorable conditions seem to be forming due to shifting spending patterns. The best part is — there is still an abundance of untapped business, which means there could be plenty of runway ahead.
Despite being a household name in the global travel industry, Airbnb (ABNB) has captured less than 1% of its total addressable market. That leaves a lot of room for growth for the company that’s pioneering the hotel-to-homes shift.
CEO Brian Chesky appears to be optimistic about the company’s prospects. In a recent interview, he identified a crucial travel pattern that could be long-term. According to data from Airbnb’s most recent fiscal quarter, enthusiastic visitors are already taking short “staycations” fewer than 50 miles from home. Furthermore, a quarter of these stays were for 28 days or more. This, according to Chesky, demonstrates customers’ rising interest in lengthier vacation stays.
“The travel rebound that began earlier this year accelerated in the third quarter, resulting in Airbnb’s strongest quarter ever,” Chesky said during last Thursday’s earnings call. “Revenue and net income were our highest ever. Adjusted EBITDA exceeded $1 billion, also our highest ever. This summer, we reached a major milestone of 1 billion cumulative guest arrivals as more people got vaccinated and relaxed travel restrictions. Host earnings reached a record $12.8 billion in the quarter, and active listings continued to grow.”
ABNB topped consensus expectations of $0.75 in reported EPS for the third quarter and $2.05 billion in revenue when it reported $1.22 EPS and $2.24 billion in quarterly revenue.
Airbnb provided its outlook for the fourth quarter, saying that it sees Q4 revenue in the $1.45 billion ballpark. The company said, “In Q4, we continue to see the positive effect of travel restrictions being lifted and global vaccination progress on our growth in Nights and Experiences Booked for stays in Q4 and into 2022. We expect Nights and Experiences Booked in Q4 2021 to significantly outperform Q4 2020 levels and approximate Q4 2019 levels. In Q3 2021, our ADR declined from Q2 2021 due to the recovery of lower ADR regions, but we expect our ADR will be relatively stable in Q4 2021 relative to Q3 2021. Consequently, we expect Q4 2021 GBV to be substantially above both Q4 2020 and Q4 2019 levels, and Q4 2021 GBV year-over-two-year growth to accelerate from Q3 2021.”
RBC Capital analyst Brad Erickson raised the firm’s price target on Airbnb to $195 from $170 and kept an Outperform rating on the shares. The company’s Q3 earnings topped expectations, even though its bookings saw a slight miss amid an “uneven recovery in travel,” the analyst tells investors in a research note. However, Erickson adds that he “remains encouraged” at indicators of the company’s FY22 growth like active listing growth and higher usage of flexible date booking, and “optimistic” for its future new product innovations to be announced.
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