Does The Juice Still Like The Company Everybody Loves To Hate?

If you took The Juice up on some of our stock picks over the last few years, you have done quite well for yourself. 

Outside of the Magnificent Seven, we have been pounding the table quite hard for other stocks, such as Uber (UBER) (up 13.5% YTD and 40.0% over the last year) and DoorDash (DASH) (up 6.0% YTD and 21.3% over the last year). And, more recently, Corning (GLW), which we call an AI Growth Stock With A Solid Dividend. GLW is up 44.2% YTD and 32.5% over the last year. 

Another name we have recommended, but haven’t been quite as loud about is Airbnb (ABNB). 

There’s increasing controversy around the company, particularly in Europe — particularly in Spain — where a backlash against tourism as a potential reason for the increased cost of housing has Airbnb under scrutiny. 

And, at times, facing regulatory pressure. 

For example, Barcelona intends to not renew existing tourists licenses on apartments, effectively putting a gradual end to Airbnb’s presence in the city within five years. There are even murmurs of a countrywide ban. But it’s not just a European thing. Airbnb faces pressure from cities in the United States and individuals who refuse to use the platform citing its apparent contribution to out-of-control housing costs and a lack of supply for locals. 

The Juice thinks a lot of this is hot air. 

While Airbnb certainly plays a role, opportunistic and, sometimes, unscrupulous landlords have more to do with housing costs than a lodging platform. Wherever you land on the argument  — and hot air or not — the controversies could impact Airbnb’s bottom line. Even if it’s a scapegoat or poster child for a bigger, more complicated problem, anti-Airbnb sentiment could lead to more bans or just greater restrictions. Therefore, Airbnb’s international strategy could take a hit. 

When we first suggested buying Airbnb stock in May 2022, we mentioned increasing international demand as a potential catalyst. Then, in an August 2023 follow-up, we expanded our thesis and touted the stock’s gains alongside UBER and DASH:

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.

Indeed, if you bought ABNB in the months after each of those articles, you quite possibly bought closer to the $100-$120 level. 

Heck, if you purchased ABNB shares in the first few weeks of July, 2022, you bought closer to $90. The stock closed 2022 in the mid-$80s. And it dipped again after our August 2023 recommendation. 

With ABNB trading for around $144, buying one of those many dips and/or dollar cost averaging over time — as we advocated — has likely worked out well for.  

So, where does The Juice stand today?

Good question. And, quite honestly, we’re taking a largely wait-and-see, cautiously optimistic approach on Airbnb, which, if we were sitting on profits from the aforementioned strategy would include:

• Taking some of those profits now
• Putting future ABNB buys on hold in favor of buying other, strong stocks, such as the Magnificent Seven, GLW, UBER and DASH. 

This doesn’t mean we wouldn’t add a little ABNB to a position with a solid cost basis and long-term outlook. It just means we would put available cash elsewhere first. 

Because, quite frankly, we just don’t know how Airbnb’s international business will unfold. 

That said, international is more than Europe. It includes Asia and Latin America, where Airbnb appears to be in the earlier innings. And there’s also Airbnb’s business outside of accommodation booking. The company also offers Experiences and other travel-related packages. 

On its most recent earnings conference call, none of this backlash even came up. As far as international is concerned, the company had this to say:

We have to localize the product, and then we have to have a, you know, global marketing strategy to go one market at a time. And, you know, we’ve done a lot of really good work over the last few years on international expansion. But I think at this moment, we are ready to step on the gas. And by stepping on the gas, I don’t mean it’s going to be a significantly greater investment, but a much greater velocity, because we spend a lot of energy updating our products.

So, most recently, we just updated our application in Asia, specifically in China. And we’re bringing a lot of those improvements to Japan and Korea because the applications work fairly similarly. And so, getting these products onto a better standard is a really good first thing that you want to do before you actually step on the gas for marketing. So, that’s international.

Asia and Latin America. These are the places Airbnb likes to talk about when asked about its international business. 

And, as of Q1/2024, the Asia Pacific region hasn’t generated even half of what the company does in Europe, the Middle East and Africa (EMEA). Latin American revenue is at just 54% of the EMEA total. 

Overall, if Airbnb sees any slowdown in its EMEA business due to restrictions and bans in Europe, we think it will be more than offset by its other international markets that the company has yet to even hit at anywhere near full throttle. 

The Bottom Line: All of this said, most of us have limited funds to invest. This is part of why we focus on buying broad market ETFs first. Then, we can only spare our remaining cash on the best of the best high-growth and dividend-paying stocks. This means that an otherwise solid company with bright future prospects might not make the cut or, at least, won’t necessarily be at the top of your watch and buy lists. 

The Juice would love your thoughts not only on ABNB stock, but on the company and how you feel about its impact (or lack thereof) on the overall housing market in cities. Use the feedback link at the bottom of the page to get in touch.

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