October 13, 2021 8:00 AM
 — 
3
 min

We Raise Our Target Valuation for Airbnb Stock

buy

We're raising our target price for Airbnb stock from $ 160 to $ 220. First, we expect the growth of the alternative housing market to continue in the long term. According to our estimates, the share of alternative housing in the global rental market has increased from 24%, recorded before the pandemic, to 33% as of now, and almost peaked in absolute terms at $ 200 billion. According to our estimates, the traditional rental market, on the contrary, has declined in 2021 by 40% to $ 400 billion, while at the end of 2019 its volume was $ 640 billion. The change in consumer preferences during the pandemic will continue to support the alternative housing market and Airbnb's business in particular.

TIKR:
ABNB

PRICE:
$174

TARGET PRICE:
$220

UPSIDE:
26%

S&P 500
4,344(-0.15%)

WTI СRUDE
80,42(-0.22%)

10Y UST
1,5440(-2.278%)

BITCOIN
$56,86(-0.25%)

Second, we believe market consensus underestimates Airbnb's 2022 growth in bookings at 17%, up from a pre-pandemic 30% growth rate. We look at this indicator more optimistically and predict an increase in the company's bookings by the end of next year by more than 20%. Third, we believe the market is very conservative about the outlook for a post-pandemic travel recovery and believes the current recovery of Airbnb bookings is temporary. We are of the opinion that Airbnb's share of the alternative housing market will continue to grow from 8% in 2021 ($ 48 billion) to 11% in 2026 ($ 126 billion). According to our financial model, Airbnb's revenue could rise to $ 19 billion by the end of 2026, EBITDA could reach $ 8 billion, and earnings per share could rise to levels above $ 8.

Airbnb's scale and brand awareness in the apartment and home rental business gives the company a distinct competitive edge in increasing its online booking share, especially among the younger generation. The uniqueness of the company lies in the direct traffic combined with a large base of rental hosts registered on the company's platform. As the rate of vaccination of the world's population grows and borders open to travelers, the potential for the company's revenue growth increases significantly. We also believe Airbnb may expand into new segments of the travel market, such as traditional hotel bookings.

According to management's forecast, the company expects to receive the highest adjusted EBITDA in its history in the third quarter, as well as record revenue, despite the negative impact of the spread of the new COVID-19 strain. June through September are generally the most profitable months for Airbnb due to seasonal factors such as summer vacations. The company is due to publish its financial statements on November 16, 2021.

Airbnb is the largest major online travel company focused primarily on short-term apartment and home rentals with $38B in lodging bookings in '19A as well as the fastest growing company (+30% y/y in '19A) in the space. The company offers over 5.6M active rental listings, the majority of which are exclusive to Airbnb. The company also offers hotel stays via its subsidiary Hotel Tonight as well as unique tours and experiences. Based in San Francisco, Airbnb operates its short-term rental booking site and app in approx 100,000 cities in over220 countries globally.

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