Should you buy Airbnb stock (Feb 2023)
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Should you buy Airbnb stock? Airbnb produced a strong earnings report yesterday and the stock jumped over 10%. That takes the market cap of the company to $84 billion. With 9.6 billion of cash and 2 billion in debt the enterprise value is just over 76 billion.
Highlights from the report was a 40% increase in revenue to 8.4 billion, a net income of 1.9 billion, which represents a net margin of 23% and the company's first full year of GAAP profits.
But Airbnb retains one key advantage which is that its properties are being used not just for vacation purposes but for working trips and longer stays.
The company is also being managed effectively and continues to improve the product. Moreover, the shareholder letter hinted at some ‘big ideas’ that could potentially expand the company’s core product.
Let’s assume Airbnb can grow net income 20% per year for the next 10 years. That would bring net income to around 12 billion. A 25 times multiple on that figure would give the company a valuation of 300 billion which works out to an investment return of 14.7% per year.
So as you can see, investors are already pricing in significant future growth. But it's hard to bet against another set of record results which is why I continue to give the stock a bullish rating.
Should you buy Airbnb stock? Airbnb produced a strong earnings report yesterday and the stock jumped over 10%. That takes the market cap of the company to $84 billion. With 9.6 billion of cash and 2 billion in debt the enterprise value is just over 76 billion.
Highlights from the report was a 40% increase in revenue to 8.4 billion, a net income of 1.9 billion, which represents a net margin of 23% and the company's first full year of GAAP profits.
But Airbnb retains one key advantage which is that its properties are being used not just for vacation purposes but for working trips and longer stays.
The company is also being managed effectively and continues to improve the product. Moreover, the shareholder letter hinted at some ‘big ideas’ that could potentially expand the company’s core product.
Let’s assume Airbnb can grow net income 20% per year for the next 10 years. That would bring net income to around 12 billion. A 25 times multiple on that figure would give the company a valuation of 300 billion which works out to an investment return of 14.7% per year.
So as you can see, investors are already pricing in significant future growth. But it's hard to bet against another set of record results which is why I continue to give the stock a bullish rating.
Transcript
00:00 Should you buy Airbnb stock? Airbnb produced a strong earnings report yesterday and the
00:05 stock jumped over 10%. That takes the market cap of the company to $84 billion. With $9.6
00:11 billion of cash and $2 billion in debt, the enterprise value is just over $76 billion.
00:17 Highlights from the report was a 40% increase in revenue to $8.4 billion, a net income of $1.9
00:23 billion which represents a net margin of 23% and the company's first full year of GAAP profits.
00:30 Adjusted EBITDA was $2.9 billion and free cash flow was $3.4 billion, a 49% increase year over
00:37 year. Alongside record financials, the company grew the number of listings on its platform by
00:42 almost 1 million and said that all of its regions saw growth in 2022. Looking ahead, Airbnb predicted
00:49 robust demand adding that European guests were already booking summer travel earlier this year
00:54 and that they were seeing market share gains in Latin America and the Asia Pacific.
00:58 After such an impressive year, the main issue with Airbnb right now is the price of the stock.
01:04 At 9 times revenue and 47 times earnings, the stock is not cheap and it's difficult to see
01:10 Airbnb vastly outperforming last year's results which quite obviously benefited from the end of
01:16 the pandemic. As well, Airbnb net income is hurt by significant amounts of stock based compensation.
01:23 But Airbnb retains one key advantage which is that its properties are being used not just for
01:28 vacations but also for working trips and longer stays. The company is also being managed effectively
01:35 and management continues to improve the product. Moreover, the shareholder letter hinted at some
01:40 big ideas that could potentially expand the company's core platform and drive incremental
01:46 revenue. Let's assume Airbnb can grow net income 20% per year for the next 10 years.
01:52 That would bring net income to around $12 billion. A 25 times multiple on that figure would give the
01:58 company a valuation of $300 billion which works out to an investment return of 14.7% per year.
02:05 So as you can see, investors are already pricing in significant future growth.
02:10 But it's hard to bet against another set of record results which is why I continue to give
02:14 the stock a bullish rating. But these are my personal opinions, not financial advice and I
02:19 do own shares in Airbnb. For more detailed investing ideas, visit our website overlookedalpha.com