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Hype Asset of the Day | November 10th, 2022



Airbnb, Inc. (NASDAQ: ABNB)

The San Francisco, California-based company Airbnb, Inc. runs an online marketplace that specializes in experiences and short-term homestays. As a broker, the business takes a commission from each reservation. Joe Gebbia, Nathan Blecharczyk, and Brian Chesky launched the business in 2008. Having recently beaten analysts’ estimates with their third-quarter results, Airbnb has seen an increase in mentions by 87% over the last day, prompting investors to wonder what makes the company gain so much hype. Currently, shares of Airbnb trade at $96.20.


Positive Hype

There are lots of ways in which Airbnb has done well for itself recently, here are some of the reasons for which it managed to generate positive hype.


  • It posted a record $1.2 billion in net income in the third quarter of 2022, demonstrating its resilience in this economy and viability as a business.


  • Airbnb's revenue surged 29% year over year (YOY) to $2.9 billion. These results surpassed Wall Street's estimates, which had called for revenue of $2.8 billion.


  • Airbnb's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 32% to $1.5 billion, and its net income leaped 46% to $1.2 billion, or $1.79 per share. That, too, exceeded analysts' estimates, which had called for per-share profits of $1.47.


  • After accounting for its greatest growth in terms of length of visit for many quarters, stays of 28 days or more now account for a reliable 20% of nights booked.


  • Urban nights booked increased 27% over last year in the second quarter, and cross-border nights booked increased 58%.


  • In the first nine months of 2022, Airbnb recorded revenue to the tune of $6.5 billion, a 46% increase compared to the same period in 2021.


  • It also ended this period with a whopping $7.5 billion in cash and cash equivalents on hand, a 24% increase on a year-over-year basis.


  • Business for Airbnb has improved across almost every metric, and Airbnb produced almost $1 billion worth of free cash flow for the quarter. Year to date, Airbnb has produced $3.3 billion in free cash flow.


  • Analysts are still forecasting the travel and tourism platform's stock has as much as a 150% upside from where it currently trades.


  • Management expects revenue to grow by 17% to 23% YOY to between $1.80 billion and $1.88 billion in the fourth quarter.


Negative Hype

No investment is perfect, and Airbnb is not an exception to this. Here are some potential drawbacks to investing in Airbnb, causing negative hype.


  • The company warned that growth in nights and experiences booked could "moderate slightly" relative to the third quarter and that foreign exchange movements could pressure its average daily rate in its international markets.


  • The short-term vacation rental platform saw bookings for nights and experiences drop below 100 million for the first time this year, due to macroeconomic headwinds.

Conclusion

Airbnb's stock is trading at a price-to-earnings ratio of 48, which is a trailing-12-month ratio and includes one-quarter of losses over the past year. That valuation doesn't look unreasonable considering it's still projecting double-digit sales growth and EBITDA to increase, and Airbnb deserves some kind of premium for its performance over the past two years. The recent strengthening of the U.S. dollar relative to other currencies will likely reverse over time. Any downturn in the company's international average daily rate should thus prove temporary. Moreover, Airbnb remains an incredibly profitable business with superb cash flow generation, meaning now that the stock is down, this is the perfect time to invest.



HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.




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