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.