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The Controversial Company ‘Everybody’ Loves To Hate

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The Controversial Company ‘Everybody’ Loves To Hate

It seems like such a long time ago. Probably because it was. 

May, 2022. When we suggested buying Airbnb (ABNB) in The Juice:

Even with Airbnb’s post-earnings pop, be on the lookout for a dip and any further weakness. If you’re a long-term investor looking to take advantage of travel creeping back to pre-pandemic levels, ABNB might be a nice place to start.

One year and a half later and travel’s basically back. Scratch that. It is back

Thanks largely to every American and their mother flooding tourist attractions throughout Europe and the biggest shot to the economy we’ve seen in a long time – Taylor Swift. 

No joke. Some projections have Taylor Swift’s present tour pumping $4.6 billion of consumer spending into our economy when it’s all said and done. The freaking Federal Reserve Bank of Philadelphia even mentioned Swift in a recent report

Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.

We can vouch for this. Swift is near the end of a six-night stand in Los Angeles, where The Juice emanates from, and you can’t walk out your front door without bumping into a Swiftie.  

And, in many cases, those fans are booking with Airbnb. Same with the people sipping Aperol Spritzes like they invented them in Italy. 

Ignore the Airbnb hate and hype. You’ve seen it, right? People treating the company like it’s a villain. 

No doubt, short-term rentals create some issues in local communities. However, it’s not only an Airbnb problem. It’s a complicated situation with loads of factors contributing to increasing rents and housing shortages around the world. 

As an investor, you have to separate hype from reality. 

No doubt, Airbnb stock took some hits shortly after we suggested it in May of last year. However, when we suggest stocks, nine times out ten, we’re talking to long-term investors. And we make that clear. We suggest stocks that we believe have strong, long-term narratives. 

If you bought ABNB on dips and weakness throughout the second half of 2022 and the first few months of 2023, you’re sitting pretty today. Because we’re geeks, we ran some numbers. 

If you bought $500 worth of ABNB on the 15th (or closest weekday) of the month, every month, starting in May of 2022, you’d have roughly 67 shares today, worth $9,391 (as of Friday’s close), good for a 25.2% return, so far, on what amounts to a $7,500 investment. 

Not as good as if you went with our Uber (UBER) and DoorDash (DASH) picks, but still pretty damn good. 

The Airbnb example also shows the power of dollar cost averaging, that is buying a stock at regular intervals over time. This strategy means you buy fewer shares when the stock price is high and more shares when it’s low. This is why we often suggest buying over time and on weakness with these – sometimes – relatively volatile names. 

Call UBER, DASH and ABNB the holy trinity. More than anything they’re tech companies. Not travel, delivery or whatever traditional category people try to fit them into. They’re tech platforms that become a part of people’s lives. The ones with the stickiest ecosystems are the ones we want to own now and buy regularly for a long, long time. 

So when Airbnb reported earnings last week, the stock market shrugged. Which sort of blows us away. Look at these numbers:

  • Revenue for Q2/2023 was $2.5 billion, up 18% year over year and 105% compared to the same quarter four years ago. 
  • Airbnb is profitable. Net income for the quarter was $650 million. Last year at this time it was $379 million. In 2019, the company lost $297 million.
  • Between April and June, travelers booked 115.1 million nights and experiences on Airbnb. The second highest quarterly total ever.
  • Airbnb expects revenue for the current third quarter to come in higher than analyst expectations at between $3.3 billion and $3.4 billion.

Why the tepid reaction from investors? Because nights and experiences revenue came in lighter than analysts expected and the average daily rate Airbnb is getting for its booking dropped a little, in part because of improvements the company made to its platform to address complaints around transparency and fees. 

Here’s the deal. Airbnb has been crushing quarters since we wrote about them last May. For goodness sake, they beat on the top and bottom lines this past quarter and raised revenue guidance for the current third quarter. Plus, they’re coming off difficult comps as people really started making bookings for summer travel in Q1 and Q2. 

The Bottom Line: We continue to say buy the dips. But don’t try to time it. Here again, if you’re a long-term investor (as in, you measure your time horizon in periods of five years rather than five days, weeks or months!), dollar cost average into this thing alongside DASH and UBER. 

Should the holy trinity be the core of your portfolio? Maybe not. Expose yourself to the broad market, better-established tech names and a healthy handful of blue chips, including reliable dividend payers. But also buy stocks – such as Uber, DoorDash and Airbnb – that will become even bigger and more stable household names in the future.

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