The travel industry struggled through the worst of the pandemic years, and all of the major hotel chains, airlines, and cruise ship companies lost money. A lot of money.
Many boutique hotels, small travel agencies, and businesses dependent on tourism were forced to close permanently, and travel-related tech companies saw dramatic drops in use.
Now that travel has started to pick up again, growth investors are on the lookout for comeback stories and value investors are watching for bargains. By any measure, Airbnb (NASDAQ:ABNB) meets both sets of criteria, making it one of the best stocks to buy and hold forever.
Why Did Airbnb Stock Go Down?
In 2023, the sharing economy concept is unremarkable, but in 2008, it was completely unheard of. The practice of connecting with strangers for a ride or a place to stay was limited to a handful of particularly adventurous travelers who were willing to take risks to save a few bucks.
Sites like Craigslist connected people interested in sharing transportation and lodging, and everyone else relied on traditional hotels, motels, planes, trains, and automobiles.
Widespread use of smart devices and rapid advances in technology gave Airbnb founders Brian Chesky, Joe Gebbia, and Nathan Blecharczyk an idea. Why not design a platform to connect travelers with lodging in a way that was safe and affordable for travelers, as well as safe and profitable for hosts.
The three launched the Airbnb website in August 2008, and they inspired an economic transformation. The idea of a tech-assisted sharing economy caught on quickly.
Uber was born in March 2009, and Lyft followed in June 2012. Today, there are dozens of sharing economy platforms that do everything from grocery delivery to dog walking.
Airbnb booked 80 guests in August 2008. As of March 2022, total bookings surpassed one billion. There are currently more than six million active Airbnb listings and more than four million hosts providing lodging in 100,000 cities and towns worldwide.
Airbnb held its IPO in December 2020, and shares immediately rose from the IPO price of $68 per share to a Nasdaq opening price of $146 per share. However, by late January 2023, Airbnb stock was trading under $115 per share – a drop of nearly 20 percent since that first day.
A number of factors contributed to Airbnb stock’s price drop. High inflation and rising interest rates put all growth stocks at a disadvantage in 2022, and tech stocks were hardest hit. The Nasdaq, which lists many tech growth stocks including Airbnb, lost more than 33 percent of its value by the end of the year.
From an industry perspective, Airbnb experienced some of the same issues as other hospitality brands during the pandemic. However, it was in a better position to withstand travel bans and stay-at-home orders, because it didn’t have the expense of managing large unoccupied properties like its hotel chain peers.
When the travel industry started to recover, Airbnb stock went up. Unfortunately, the recovery stalled as travelers grew concerned about higher prices for essential goods and services and the prospect of a recession.
Though the third quarter of 2022 was the company’s most profitable quarter ever, Airbnb stock went down following its Q3 earnings announcement. Shareholders were alarmed by the prospect of another lull in the travel industry, and they elected to trade their Airbnb stock for safer, more reliable alternatives.
Will Airbnb Stock Go Up?
Airbnb’s third quarter 2022 results and its wide moat suggest the company will not only recover – it will thrive. Some of the most notable figures from its most recent earnings report include:
Nights and Experiences Booked – 99.7 million, an increase of 25 percent year-over-year
Gross Booking Value (GBV) – $15.6 billion, an increase of 31 percent year-over-year
Revenue – $2.9 billion, an increase of 29 percent year-over-year
Net Income – $1.2 billion, an increase of 46 percent year-over-year
Adjusted EBITDA – $1.5 billion, an increase of 32 percent year-over-year
A small number of analysts have indicated their position on Airbnb stock is bearish. They believe the platform has saturated the market, and they aren’t confident that there is room for continued growth – or at least, no substantial continued growth. What they fail to consider is the fact that Airbnb is led by innovators, and those innovators are already working on new ways to enhance Airbnb’s offerings and expand its community of hosts and guests.
Airbnb is exploring new use cases that support changing lifestyles. For example, the increase in remote workers has created an emerging work-from-anywhere culture, and Airbnb is ready to make the most of it.
There is huge growth potential for mid-length and long-term stays now that employees have new flexibility to combine work and travel. Airbnb is campaigning to be the brand of choice for those travelers, and there are early signs of success.
On the other side of the equation, Airbnb is making it easier for new hosts to join the Airbnb community. The platform’s leaders see opportunity in economic uncertainty, as more people are seeking methods of supplementing their income.
Remember, Airbnb launched during the global financial crisis, and it immediately caught on as the 2009 recession strained household budgets. Airbnb has special insight into making the sharing economy work in a way that benefits all sides of the transaction.
Finally, a big part of Airbnb’s core business comes from urban and cross-border travel – the areas that saw the most significant declines during the pandemic. That type of travel is ramping up, and it still has farther to go before recovery is complete.
Once Airbnb reaches and surpasses former levels of urban and cross-border travel, then adds in revenue realized from its new focus on long-term stays, a majority of analysts believe that the company will be unstoppable – and that Airbnb stock will go up. That’s good news for growth investors, and it meets the needs of value investors who can buy Airbnb stock at today’s low price.
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