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Airbnb stock has dazzled and intrigued investors in growth stocks since its Nasdaq debut in December 2020. From its initial public offering price of $68 per share, ABNB stock soared as much as 223%, hitting an all-time high of 219.94 on Feb. 11, 2021.
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In 2021, the travel industry faced the challenge posed by multiple strains of Covid-19, including the delta and omicron variants. But 2022 is a different story; known cases of Covid-19 have fallen sharply in both the U.S. and Europe. More countries are ending quarantine or testing requirements for incoming travelers that show proof of full vaccination.
Meanwhile, more business travelers say they are feeling more comfortable about flying again.
A new survey conducted in March by Morning Consult, done on behalf of the American Hotel & Lodging Association (AHLA), finds that sentiment is shifting on the business travel front. The survey noted 77% of business travelers and 64% of employed Americans agree that “it is more important than ever to bring back business travel.”
Airbnb Stock: Is It Rebounding For Real This Time?
Good news for Airbnb (ABNB). However, shares closed a tough April for equities more than 30% off a 52-week high. And ABNB is trying to halt a bone-crushing slide over the past five weeks. At 122, the stock is now trading nearly 43% below a 52-week peak of 212.58.
In contrast, the S&P 500 closed Monday’s action at 4121, only 14% beneath its all-time high of 4818.
Early in May, the Airbnb posted a net loss of $19 million and adjusted EBITDA of $229 million, vs. a net loss of $1.2 billion and an EBITDA loss of $59 million in the same period of 2021. Net loss of 3 cents per share vastly improves upon the $1.95 lost by the company a year earlier.
Sales rose 70% to $1.51 billion. That marked a fifth quarter in a row of healthy top-line gains. The average revenue increase over that five-quarter time frame: 104%! Q1 free cash flow topped $1 billion. Company management cited strong revenue gains and expanding profit margins.
So, is Airbnb stock a buy now? Or is it time lock in profits or cut losses and sell?
This story analyzes all facets of the innovator in leisure travel in terms of fundamentals, technicals and mutual fund ownership. All of these elements get inputted into CAN SLIM, IBD’s research-driven seven-point paradigm for successful growth stock investing.
Airbnb Stock Today
In March, CFRA announced it’s keeping a $215 price target. The investment bank also boosted its fiscal 2022 earnings estimate to $1.33 a share from 76 cents and the 2023 forecast to $2.21 from $1.16.
The Street’s current consensus forecast: $1.84 a share for 2022 vs. a net loss of 57 cents last year, and $2.42 (up 32%) for 2023.
Clearly, ABNB remains in base-building mode and is trying to bottom out. Shares went public at $68 a share in December 2020.
At this point, crossing bullishly back above the 50-day moving average, near 150, would be a critical step in getting the stock primed for a new breakout.
The 50-day moving average traces, on a daily chart, a stock’s price trend over the 50 most recent trading sessions. Before a potential breakout to new highs, you’d like to see a growth stock rise above its 50- and 200-day lines and pull them higher.
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Attractive Business Model
The San Francisco-based firm’s disruptive business model: Allow house and condo owners turn their properties into short-term rentals. The idea has hatched plenty of competitors. Even large hotel chains offer similar properties in addition to their standard lodging accommodations.
On the Feb. 23 episode of IBD Live on Zoom, Jason Thomson, portfolio manager at O’Neil Capital Management, noted that millennials’ desire to travel in large groups and desire to make last-minute plans make the Airbnb offering especially attractive. And that has not gone unnoticed by the major hotel chains.
“We have millions of Airbnb hosts who offer nearly every type of home in nearly every community around the world,” the company wrote in a Q4 news release. Executives also noted that guests are “discovering thousands of small towns and rural communities on Airbnb” while also returning to cities. Gross nights booked at urban locales accelerated vs. Q3 and “have nearly recovered to Q4 2019 levels.”
In the first quarter of 2022, Airbnb saw 102.1 million nights and experiences on its platform, and that surpassed pre-pandemic levels. Activity in North America, EMEA (Europe, Middle East and Africa) and Latin America drove the results. Groos booking value surged 67% year over year (up 71% excluding forex changes) to $17.2 billion.
Total diluted shares outstanding came in at 681 million shares at the end of the fourth quarter. MarketSmith data currently shows ABNB with 636 million shares outstanding.
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ABNB Stock Analysis: Is Relative Strength On The Mend?
Airbnb’s Relative Strength Rating is rising again, now at 30 on a scale of 1 to 99. Yet that rating is well down from 90 in February. The current RS rating means ABNB outperforms just 30% of all companies in the IBD database over a 12-month time frame.
You generally want to home in on companies that show an RS Rating of 85 or higher. Why? That way you’re selecting stocks already showing strength ahead of a potential breakout to new highs and a profitable price run.
An 85 Rating means a stock is already ranking in the top 15% in terms of stock price strength. When it comes to picking high-flying growth stocks, those with superior price strength tend to make new highs, then keep going higher.
Keep an eye on the Accumulation/Distribution Rating. Right now, Airbnb gets an undesirable D grade on a scale of A to E. This proprietary IBD rating measures the amount of heavy institutional buying vs. selling over the past three months. A grade of C+ or higher denotes net institutional buying over the past 13 weeks; a C- or lower points to net selling.
If you want a stock that is eagerly getting scooped by mutual funds, banks, college endowments and the like, prefer those with an A or B grade before you buy.
For now, Airbnb’s 68 Earnings Per Share Rating is also rising but still not great. It means ABNB’s profit record in the near and long term beats 67% of all publicly traded companies. In most cases, you’d prefer companies with an EPS score of 80 or higher. The SMR Rating, analyzing sales, profit margins and return on equity, moved up to a C grade, neutral on a scale of A to E.
The I In CAN SLIM: Institutional Ownership
Fortunately, mutual funds continue to accumulate ABNB stock.
MarketSmith data shows the total number of mutual funds owning a piece of Airbnb keeps rising. It has hit a record 1,405 funds at the end of the first quarter of this year, up from 664 in Q4 2020.
Top funds holding a stake include Fidelity Blue Chip Growth (FBGRX), Harbor Capital Appreciation (HACAX), PGIM Jennison Growth (PJFAX), Marsico Focus (MFOCX) and Artisan Developing World (ARTYX). ABNB makes up 6.6% of Artisan Developing World’s assets.
Fidelity Contrafund (FCNTX), JPMorgan Large Cap Growth (SEEGX), Franklin Growth (FKGRX) and Wells Fargo Growth (SGRAX) — all members of the IBD Mutual Fund Index, also now have positions in the stock.
Management owns 1% of Airbnb stock. The float, now at 374.6 million shares according to MarketSmith, has risen sharply. The float makes up 59% of the 636.5 million shares outstanding. So, individual investors should prepare for secondary offerings of closely held shares that could hit the stock in the future.
Why The 2021 Breakout Failed
From September to October 2021, a handle formed on ABNB’s deep cup pattern. This offered a proper entry point at 177.06. A handle simply denotes a relatively quiet pullback after a stock falls sharply in price, then rebounds close to all-time highs. This last shakeout of disgruntled or uncommitted holders clears the decks for a first-class breakout.
On Nov. 4, right ahead of Q3 results, ABNB shares stretched past this aggressive entry. Then on Nov. 5, the stock staged a bullish breakaway gap.
This means the right time to buy shares was near 194, when Airbnb stock rallied sharply in that session’s first five minutes of trading, then kept going past the high of the first 5-minute intraday trading bar. Please read more about the technique of buying a breakaway gap in this Investor’s Corner. Buying breakaway gaps work best in a strong bull market, especially coming out of a deep or long correction.
But the threat of Covid-19’s omicron variant shook the world, and the stock dove sharply below the 177.06 and 194 buy points. The negative reversal forced new buyers to sell shares to keep losses small.
Airbnb Stock Chart Analysis Today
For now, a 6-month deep cup pattern is taking shape. It holds a 212.68 entry point, 10 cents above the left cup’s peak. But this means ABNB needs to first rally 75% just to approach that buy point.
So for now, ABNB is not a buy.
At some point, Airbnb may stage a strong breakout to 52-week highs.
When that happens, always stay disciplined with position management; cut losses short if the stock breaks expectations. William O’Neil, founder of Investor’s Business Daily, discovered during decades of research that the biggest stock market winners rarely fall more than 7% to 8% below a proper buy point.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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