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Evaluating Airbnb’s (ABNB) Upside Potential in June

Following the recovery of the travel sector, Airbnb, Inc. (ABNB) reported strong first-quarter results. However, does the current surge in revenue raise the company’s future prospects? Let’s look at its fundamentals to examine its upside potential…

The pandemic and turbulent macroeconomic climate posed challenges to the travel industry over the past two years as hotel chains and rental companies faced a slump in demand. However, the sector has rebounded since, with pent-up demand for travel boosting revenues.

One such company, Airbnb, Inc. (ABNB), witnessed a strong start to the year. The company is set to focus on a few strategic priorities in the near term. Following an acceleration of 18% year-over-year growth of its total active listings, the company is raising awareness around hosting by making it easier and more efficient for Hosts.

Amid high inflation, ABNB is working towards providing affordable housing by improving pricing tools and transparent checkout instructions, among 50 other new features and upgrades. Moreover, the company is expanding its market by focusing and investing in less mature international markets.

Further, the company is looking forward to a strong summer travel season. It expects to deliver revenue of $2.35 to $2.45 billion in the second quarter of 2023, representing a year-over-year growth of between 12% and 16%. Year-over-year growth in Nights and Experiences Booked is anticipated to be lower than its revenue growth during the same quarter.

Its adjusted EBITDA is expected to be similar to that of the second quarter of 2022 on a nominal basis but lower on a margin basis, the decline primarily driven by changes in the expected timing of the company’s marketing spend relative to the prior year.

ABNB’s stock has gained 37.2% year-to-date and 26% over the past six months to close its last trading session at $117.30.

It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Additionally, Wall Street analysts expect the stock to hit $129.29 in the near term, indicating a potential upside of 9.3%.

Here are some factors that could influence ABNB’s performance in the upcoming months:

Robust Financials

For the fiscal first quarter that ended March 31, 2023, ABNB’s revenue increased 20.5% year-over-year to $1.82 billion. The company’s net income came in at $117 million, compared to its net loss of $19 million for the prior-year quarter.

Its adjusted EBITDA increased 14.4% year-over-year to $262 million. In addition, its net EPS attributable to Class A and Class B common stockholders came in at $0.18, compared to a net loss per share of $0.03 for the year-ago period. 

High Profitability 

In terms of the trailing-12-month EBIT margin, ABNB’s 21.74% is 196.5% higher than the industry average of 7.33%. Its 23.30% trailing-12-month net income margin is 444.1% higher than the industry average of 4.28%. Likewise, its 32.16% trailing-12-month levered FCF margin is 862.5% higher than the 3.34% industry average.

Favorable Analyst Estimates

The consensus EPS estimate of $3.45 for the fiscal year 2023 represents a 23.7% improvement year-over-year. The consensus revenue estimate of $9.53 billion for the same year indicates a 13.4% increase from the prior year.

Its EPS for fiscal 2024 is expected to increase 14.8% year-over-year to $3.96, while its revenue is expected to increase 13.5% year-over-year to $10.81 billion.  

ABNB's EPS and revenue for the quarter ending June 30, 2023, are expected to increase 39.8% and 14.7% year-over-year to $0.78 and $2.41 billion, respectively.  

POWR Ratings Show Promise

ABNB’s promising prospects are reflected in its POWR Ratings. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories.

The stock has an A grade for Quality, in sync with its high profitability. Its B grade for Momentum is justified by the stock trading higher than its 50-day and 200-day moving averages of $114.64 and $109.99.

Within the B-rated Travel - Hotels/Resorts industry, ABNB is ranked #15 out of 22 stocks.  

Click here to access the additional ratings of ABNB for Growth, Value, Stability, and Sentiment. 

Bottom Line

Pent-up travel demand could bode well for ABNB in the upcoming months. With the company reporting a strong first-quarter performance and providing optimistic expectations about its second-quarter results, the stock could be a sound watchlist addition in the month of June.  

How Does Airbnb, Inc. (ABNB) Stack Up Against Its Peers? 

One may also want to consider these other stocks within the Travel - Hotels/Resorts industry with a B (Buy) rating: Bluegreen Vacations Holding Corporation (BVH), Genting Singapore Limited (GIGNY), and Playa Hotels & Resorts N.V. (PLYA).

What To Do Next?

Get your hands on this special report with three low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

ABNB shares were trading at $116.99 per share on Wednesday afternoon, down $0.31 (-0.26%). Year-to-date, ABNB has gained 36.83%, versus a 12.03% rise in the benchmark S&P 500 index during the same period.

About the Author: Malaika Alphonsus

Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.


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