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Airbnb
shares came under selling pressure on Monday amid a flood of Wall Street analyst reports, many of them suggesting that the short-term real-estate rental company’s spectacular stock market debut leaves the stock with minimal near-term upside.
Airbnb (ticker: ABNB) went public in early December at $68 a share, which was well above the both original anticipated price range of $44 to $50 a share, and the updated range of $56 to $60. The stock opened for trading at $146, and peaked a few weeks later on an intraday basis at close to $175. The company ended the year at $146.80, about flat with the opening trade, giving the company a valuation of close to $90 billion.
At least 18 analysts picked up coverage of the company on Monday morning, including six Buy or Outperform ratings (Baird, Canaccord, Needham, D.A. Davidson, JMP Securities, and Jefferies). There were at least a dozen Hold ratings, a group that includes the two lead underwriters for the Airbnb IPO, Morgan Stanley and Goldman Sachs, as well as KeyBanc, Wedbush, Oppenheimer, DeutscheBank, Raymond James, Credit Suisse, Mizuho, Stifel, Bank of America, and Wells Fargo. There were no Sell ratings.
The story here is a familiar one: While there is enthusiasm for the company’s business prospects, there are concerns that the current valuation already recognizes its current growth outlook. The Street took a similar stance on Monday in initiating coverage of both
DoorDash
(DASH) and
C3.ai
(AI), which like Airbnb had big post-IPO runs and which also received generally cautious commentary from the Street.
Goldman Sachs analyst Heath Terry launched coverage of Airbnb with a Neutral rating and a $146 target price. Terry sees great promise in the company’s model.
“Beyond simply providing an alternative to hotels for a vacationing family, Airbnb allows a property owner in one city to generate revenue to secure housing in another city,” Terry writes in a research note. “To the extent that a more mobile workforce will be a major feature of post-pandemic society, Airbnb will be a critical part of the ecosystem that enables it. We see this, and the platform optionality it creates, along with opportunities in travel and experiences, as one of the most significant early-stage growth propositions in the internet sector.”
While noting that near-term pandemic headwinds will weigh on financial performance, Terry also points out that the company is gaining market share in the online travel and lodging sector. “With management having significantly reduced costs in the early days of the pandemic, aligning the cost structure around the core alternative accommodations business, the economics of the model at scale are among the most favorable that we see in the online travel space,” he adds.
All that said, Terry is not comfortable recommending the stock, noting that Airbnb as of last week’s close was trading for 17 times his 2022 sales estimate, with a three-year compounded growth rate of 33%, versus peers trading for 5 times sales on 27% compounded growth. Terry writes that he will “look for better entry points.”
Morgan Stanley analyst Brian Nowak has a similar view, picking up coverage with an Equal Weight rating and a $140 target price. “We like Airbnb’s ‘verb’ status” in the alternative accommodation market, pointing to a mammoth $810 billion total addressable market. He thinks the company’s brand leadership can drive 14% compounded revenue growth through 2024. But he also notes that the multiple “seems full,” and he also advises investors to “await [a] better entry point.”
Oppenheimer’s Jed Kelly plays on the same theme, starting with a Perform rating in a note headlined “Valuation at Full Occupancy.” Kelly finds Airbnb to be “the best positioned travel company into the post-Covid recovery based on its strong global brand and ability to quickly adjust to travelers’ needs.” And he adds that the “work from anywhere” trend provides a strong tailwind. But he suggests waiting for a lower price to buy the stock.
Needham’s Brad Erickson has a more bullish view, launching coverage with a Buy rating and a $200 target price. Among other things, he notes that the company is one of the few players in online travel not dependent on Google searches to drive traffic to its site.
“The company is the category creator and clear leader in private and alternative accommodations, a market that could expand as much as five to 10 times from its current size as it democratizes travel,” Erickson writes. “On top of getting credit for creating travel’s private accommodation category and serving as a verb that epitomizes the essence of contemporary wanderlust, Airbnb comes to the public markets distinguishing itself as the first major online travel property that is not overly reliant on Google for traffic.” He notes that about 90% of traffic is either direct or through unpaid channels.
On Monday, Airbnb was off 4.3%, to $140.50.
Write to Eric J. Savitz at [email protected]
