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US-based Airbnb is one of the most well-known companies for millennials and Generation Z renowned in the travel and hospitality segment. The company uses its own website-enabled and mobile-application-based online platform to help travelers across the globe find homestays for an array of purposes including lodging, primary homestays, vacation rentals, and tourism. This article discuss the Airbnb stock outlook.
The company now has over 4 million hosts around the world who use its platform to offer their services and this number is only increasing with each passing day. In its essence, it is transforming every extra room into a hotel. The huge variety of properties available also attracts a large number of users to its platform.
Due to the pandemic, people’s travel plans started getting canceled or delayed and that made a massive impact on the travel and hospitality industry. Consequently, Airbnb stock, too, went on a roller coaster ride. However, as the COVID-19 cases in the US started witnessing a moderate declining trend, this stock has again rallied over 60% since the past week and 10% from the last month, hugely surpassing the S&P 500 that had only gained a mere 2% over the past month.
Changed Travel Requirements
Since the pandemic, the travel industry has witnessed a massive change, and Airbnb, having its presence in over 1,000 cities, is in a perfect position to grab those incoming market opportunities.
Firstly, the pandemic has made remote working a normal, everyday affair. This led to people having a more flexible work schedule where they can solely decide from when and where they want to work. So, rather than working from their boring homes, many people are opting to work from attractive locations instead, thereby influencing Airbnb sales to a huge extent.
Secondly, more travelers these days are opting for unique experiences rather than visiting routine places of tourist attraction. The Airbnb platform houses over 17,000 unique listings that range from treehouses in the rainforests of Hawaii to tiny houses in the Italian Alps or even castles in the English countryside. In fact, it has been found that compared to 2019, peoples’ search for such unique stays has gone up by a whopping 94%. As no other hotel chain provides such a varied experience, Airbnb gets a major advantage in this segment.
Finally, because of the COVID-19 virus, people are choosing remote locations over others. It was found this year that over 22% of nights booked on Airbnb are in rural areas, whereas back in 2015 the figure was less than 10%. Airbnb gets an advantage in this segment as well because its inventory is more dynamic, making it much easier for the company to onboard a new host rather than building a brand-new property that traditional hotels have to go through. Moreover, Airbnb homes are more suitable for following social distancing norms compared to other hotels in the present times.
As the Airbnb stock has so much of an advantage over traditional hotels, the stock might see another boom in the coming days
Strong Financial Performance
Airbnb has always been a strong performer. However, as the COVID-induced recession had taken a toll on the travel and hospitality industry, it had become very difficult for Airbnb, too, in the last year to hold back to its margins. However, as aggressive vaccination programs started taking place across the globe, largely in regions like the United States and Europe, the demand for travel increased once again, and consequently, the company saw another huge growth spurt in its sales, especially since the second quarter of this year.
Airbnb has been a terrific performance in the second quarter of 2021. In its second-quarter financials, the company reported revenue of $1.3 billion against the $335 million of the same period last year, indicating a massive 300% YOY gain. This huge growth in revenue also bolstered the company’s earnings and its net loss for the quarter contracted significantly by $507 million to only $68 million. Moreover, a positive adjusted EBITDA of $217 million was achieved, while in the Q2 of 2020 and 2019, respectively, adjusted EBITDA losses of $397 million and $43 million were recorded.
So, as the number of vaccinated people is increasing and travel restrictions are being eased, more people can start traveling. Therefore, this increased booking trend that was seen in the second quarter of this year is expected to continue further in the coming days as well and this trend can uplift Airbnb’s revenues significantly, thus pushing the stock to bounce back to the pre-pandemic days soon.
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Unique business model
Airbnb is a revolutionary company that has disrupted traditional travel and the hotel industry. This online accommodation provider does not build, operate, or maintain travel accommodations for travelers by itself like other traditional hotels, resorts, or vacation properties. Instead, it encourages people to make their personal spare rooms, garages, vacation homes, or trailers available to the company against some consideration so that when the travel folks look up to its online platform, they can find numerous alternatives to choose from which they won’t get in the case of other hotels.
Moreover, the asset-light business model also gives the company a competitive edge over others in the industry and aids the company in maintaining a much-improved asset-turnover ratio compared to most other big industry names. Though the company is currently operating at a loss, it still has a lot of growth potential and can attain much better margins in the coming times.
Airbnb stock is pretty enticing considering the strong performance it has delivered since its debut in the market. The above-mentioned paragraphs also specify its growth potential in the coming times. Additionally, the company has a highly dynamic set of operations, and its adaptive business model approach always ensures that it can successfully grab any new market opportunities available at any point in time. So, as the world is witnessing a rebound in different types of travel, the Airbnb stock will also get the required momentum now. Moreover, it is still cheap and is yet to go back to pre-pandemic levels, which means this is the perfect time to buy this stock and book future gains.
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