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Airbnb Inc Ordinary Shares - Class A ABNB

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Morningstar’s Analysis

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Airbnb’s High Demand Levels Sustained by Work Flexibility and Desire to Travel; Shares Expensive

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

Narrow-moat Airbnb saw stout third-quarter demand and profit improvement, aided by continued strength in the U.S., flexible working, and a broadening of travel to regions such as Europe. Specifically, sales reached 136% of 2019’s level, up from 110% in the prior quarter, although bookings declined to 123% of 2019 levels versus 137% in the prior quarter, due to lengthened booking windows and delta variant concerns. Overall, demand continues to be driven by rates that were 132% of the prepandemic level, with room nights reaching 93% of 2019’s level. Rates have been pushed higher by a travel mix of U.S. and larger home bookings, but this benefit is likely to wane as other lower price regions begin to increase. To this point, cross-border gross room nights improved to 33% of the mix in the quarter versus 27% and 20% in the second and first quarters, respectively. Also, high-density urban room night mix grew to 46% in the quarter versus just above 40% last quarter. Looking at the rest of 2021, Airbnb commented it was seeing improving booking growth in October, as delta concerns subside. We plan to increase our $90 fair value estimate around 10%, mostly to account for worker flexibility driving higher long-term travel demand, as well as for stronger near-term profitability. Our constructive stance on remote working conditions is formed by higher-income occupations (like computers, finance, legal, and architecture) being the most likely industries to sustain such flexibility. We view shares as overvalued.

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Company Profile

Business Description

Started in 2008, Airbnb is the world’s largest online alternative accommodation travel agency, also offering booking services for boutique hotels and experiences. Airbnb’s platform offered 5.6 million active accommodation listings in 2020. Listings from the company’s 4 million hosts are spread over 220 countries and 100,000 cities. In 2020, 53% of revenue was from the North American region, 30% from Europe/Middle East/Africa, 10% from Asia-Pacific, and 7% from Latin America. Transaction fees for online bookings account for all its revenue.

888 Brannan Street
San Francisco, CA, 94103
T +1 415 510-4027
Sector Consumer Cyclical
Industry Travel Services
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 5,597