While most growth stocks have taken a drubbing over the past 6 months, one red hot stock has bucked the trend: Airbnb. What is it that makes Airbnb so special and why is this growth juggernaut not slowing down?
Just as eCommerce innovator and disruptor, Amazon, leveraged technology to disrupt brick-and-mortar stores, so too has Airbnb built a technology platform to disrupt legacy hotel chains.
Airbnb has the opportunity to integrate aspects of the travel ecosystem into its platform. Everything from food recommendations to reservations and vacation planning could fit under Airbnb’s corporate umbrella.
Another tailwind in Airbnb’s favor is its ability to offer lower prices relative to hotels, which it can offer because it isn’t burdened like a hotel chain with the ownership costs. That should provide some cushion against the headwinds of inflation.
How Much Potential Does Airbnb Have?
Should You Buy Airbnb?
If the decision to buy Airbnb could be evaluated by tallying up the pros and cons, it would look something like this. In the plus column, Airbnb is growing fast and is forecasted to continue doing so. Structural workforce changes should contribute to higher demand going forward. And Airbnb’s opportunity to create a travel ecosystem under one corporate umbrella offers the company a chance to build a sustainable competitive advantage.
In the minus column, Airbnb is fully priced from a valuation perspective. A miss on revenue, earnings or even a signal by management to Wall Street during an earnings report that growth is slowing could be punished severely by the market.
So should you buy Airbnb?
The short answer is yes it deserves a place in most portfolios, but the time to buy is not now. Wait for a pullback to create a margin of safety before pouncing. A price below $115 per share would offer a compelling entry point with decent upside to fair value.