In the midst of the Coronavirus pandemic, online vacation rental marketplace Airbnb decided to go public. In December 2020, Airbnb stock started trading on the Nasdaq stock exchange.
Incredibly, the share price surged 117% by opening at $146 per share, more than double the scheduled $68 IPO share price. This gave the company a whopping $86.5 billion valuation.
Airbnb’s valuation increased during the challenging coronavirus crisis
Immediately, Airbnb established itself as one of the most valuable companies of the tourism and travel sector, matching Booking’s $86 billion market cap, and eclipsing Expedia’s $18 billion valuation. In fact, Airbnb’s market capitalization was more than double hotel chain Marriott’s, valued at $42 billion, and nearly triple Hilton’s, valued at $29 billion.
A surprising IPO
While Airbnb’s plans of going public had been revealed well before the outbreak of the coronavirus pandemic, analysts believed the company would postpone its IPO plans once the worst of the crisis had passed. Clearly, going public when the entire travel and tourism industry was being crushed by restrictions was a questionable move.
Indeed, Airbnb’s 2020 revenues fell 19% compared to 2019, as reservations on the platform dried up as soon as the March 2020 restrictions were implemented. In March and April 2020, business dropped 80%, before slowly recovering over the following months.
However, despite the pain, Airbnb managed to remain profitable, posting a $219 million profit in 2020. Evidently, management was doing something right, so going through with the IPO seemed like a reasonable strategy.
A roller coaster of emotions
For Airbnb shareholders, the next year and a half was a roller coaster of emotions.
From December 2020 to February 2021, the stock price surged 52%, rising from $139.25 to $212.68, before crashing 36% to $134.71 in May 2021. Since then, the stock has yo-yoed, going back up to $206.54 in November 2021, going down again to $142.70 at the beginning of March, before climbing back up to $175.
Despite the incredible volatility, the stock is up 26% since the IPO date, giving Airbnb an impressive $112 billion market cap, which is $20 billion higher than Booking’s and nearly four times higher than Expedia’s.
It is clear that Airbnb is emerging from the crisis as a “best-of-breed” travel and tourism stock.
Should you buy Airbnb stock?
As the world starts to lift coronavirus restrictions, the travel, and tourism industry’s prospects are looking good. People are starting to resume vacationing, local tourism is on the rise, and the flexible remote work culture remains popular.
All of these factors will benefit Airbnb’s business model. Indeed, the platform enables homeowners in any location around the world to offer their properties as rentals. This means that travelers and remote workers can call anywhere home. This – in addition to its extensive user database – is arguably Airbnb’s biggest competitive advantage over its historic rivals, the hotel chains that are usually located in major urban centers.
These strong fundamentals point to continued revenue growth and increasing profitability over the next decade. Thus, investors with a long investment horizon should consider initiating a position or holding on to their shares for the foreseeable future.
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