Turning Couches into Cash: Air BnB Stock Analysis

Ticker: ABNB
Sector: Consumer Discretionary
Industry: Hotels, Restaurants, Leisure
Headquartered: California, USA
Moat: Narrow – Network Effects, Scale

Action at date of this post

Strong Buy as of 04.12.2024
The price and value intersection points to buying as much as the full amount you intend on investing or somewhere in the range of 50-100% of your intended position. Then look for opportunities to complete the position or buy in systematically over time.

Air BnB Fair Value Analysis

I do a fair value analysis on every stock in two ways. The first is the Discounted Cash Flow (DCF) method which I use for most stocks. I also run the Peter Lynch Fair Value method on stocks as well. I like running both as there are times where one way is more meaningful than the other depending on the stock.

Air BnB Corporate Overview

Airbnb is a leading online marketplace for lodging and tourism experiences, revolutionizing the hospitality industry since its inception in 2008. Through its platform, Airbnb connects hosts with guests seeking unique accommodations worldwide, ranging from private homes and apartments to boutique hotels and vacation rentals. With a user-friendly interface and robust search capabilities, Airbnb has amassed a vast and diverse inventory of listings, catering to various preferences and budgets.

The company’s business model relies on commissions earned from both hosts and guests for facilitating bookings. Leveraging advanced technology and data analytics, Airbnb continually enhances its platform to improve user experience, increase booking efficiency, and drive revenue growth. Moreover, Airbnb has expanded its offerings beyond accommodations to include Experiences, allowing users to book local activities and guided tours.

Airbnb’s strong brand recognition, global presence, and innovative approach to travel accommodation position it as a key player in the sharing economy.

Air BnB Segment Analysis

Air BnB reports in one segment which is Nights and Experiences Booked. Therefore, it’s meaningful to look at a geographic breakdown of the business. The following charts are sourced from the 10k report filed for the 4th quarter of 2023.

Air BnB Narrow Moat Source

The company’s narrow moat comes from a two-sided network effect where the more people post their homes for use the more people can travel which spurs more people posting their place for use. As well, the company now has scale to develop it’s network and technology to attract more hosts. 

Growth Outlook

With over 5 million hosts and 7.7 million listing, Air BnB has reached critical mass in its market with a little more than 10% market share. The company’s app is a top 10 travel app and the company’s name is now used as a verb and a noun. This bodes well for the company as it’s entrenched in people’s psyche when it comes to travel accommodation and experiences. 

The company’s founder and CEO, Brian Chesney, has admitted that the company is now searching for how to grow the business beyond hosting places. To this end, leadership has bolstered it’s international efforts as well as expanding into experiences.

As the post pandemic world settles into a new rhythm, the company stands to benefit from remote working and long-term travel demands. The company has seen a jump in lengths of stays in certain areas which has shown up on the bottom line. There is good reason to think that this type of business will be around permanently. 

The Numbers

Air BnB has held solid ROIC, margins and free cash flow generation. These are all things we want to see in a company that allows for easy clearance of cost of capital. Cash conversion has been very strong and debt acceptable. Revenue growth, although slower, is still adjusting from the pandemic pop.

This website and associated newsletter along with its content/links are not financial advice. Nothing in this newsletter is an investment recommendation. All content is created for entertainment, educational, or informational purposes only. My strong buy, accumulate, hold, reduce or sell opinions are exactly that – opinions. Be sure to do your own research for your own particular circumstances or higher a professional advisor.

At the time of writing this post, the author does have a position in ABNB.