We came across a bullish thesis on Airbnb, Inc. (ABNB) on Substack by The Wolf of Harcourt Street. In this article, we will summarize the bulls’ thesis on ABNB. Airbnb, Inc. (ABNB)’s share was trading at $133.20 as of Nov 12th. ABNB’s trailing and forward P/E were 47.71 and 29.24 respectively according to Yahoo Finance.
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Airbnb’s Q3 2024 saw solid growth, with Nights and Experiences Booked increasing by 8% year-over-year (YoY), driven by strong momentum toward the quarter’s end, achieving double-digit growth. Gross Booking Value (GBV) reached $20.1 billion, up 10% YoY, supported by increased bookings and a 1% rise in the Average Daily Rate (ADR) to $164. The take rate remained steady at 18.6%, with additional revenue from cross-currency fees offsetting Airbnb’s customer service investments, enhancing experiences for both guests and hosts.
Airbnb’s revenue hit a record $3.73 billion, reflecting 10% YoY growth driven by higher bookings and modest ADR increases. Operating income stood at $1.53 billion with a 41% margin, slightly down from 44% in Q3 2023, largely due to a 28% increase in sales and marketing expenses aimed at bolstering growth in under-penetrated regions. Net income was $1.37 billion, resulting in a 37% net margin. The year-over-year decline was anticipated, attributed to a one-time tax benefit in 2023 and non-cash tax expenses in Q3 2024.
Airbnb generated $1.1 billion in free cash flow (FCF) during the quarter, a decline from $1.3 billion in Q3 2023, due to a $163 million IRS payment. Despite this, Airbnb’s FCF for the trailing twelve months reached $4.1 billion with a 38% margin, a testament to its robust cash-generating ability. Capitalizing on this, the company repurchased $1.1 billion in stock during Q3, contributing to a total of $3.3 billion in buybacks over the past year, reducing diluted share count from 681 million to 665 million.
Looking forward, Airbnb’s management projects Q4 revenue between $2.39 billion and $2.44 billion, implying approximately 9% YoY growth at the midpoint. Adjusting for a one-time Q4 2023 gift card benefit, the growth rate would rise by roughly 2%. CEO Brian Chesky emphasized diversifying Airbnb’s offerings beyond vacation rentals, with plans to introduce ventures like the revamped Airbnb Experiences launching in May 2024. Targeted at both travelers and locals, this initiative aims to foster frequent use and loyalty through unique, accessible activities.
The company’s regional performance underscored sustained demand across diverse geographies. North America saw growth in short-term stays and entire home bookings, while EMEA benefited from events like the Paris 2024 Olympics, with significant guest influx and a notable increase in Paris listings. Latin America and Asia Pacific experienced double-digit YoY growth in bookings, underpinned by resilient domestic travel and a steady recovery in cross-border activity, particularly to Asia Pacific destinations.
Strategically, Airbnb is refining its core services, introducing over 535 new features in recent years to enhance both guest and host experiences. Recent upgrades include personalized search filters and quality-focused improvements, which have seen Airbnb remove 300,000 low-performing listings. These efforts align with Airbnb’s broader ambition of making hosting mainstream, aiming to attract more hosts through resources like the Co-Host Network.
With resilient revenue and cash flow metrics, solid user engagement, and a streamlined strategy focused on expansion and service quality, Airbnb remains well-positioned for sustained growth. Its diversified focus on core enhancements and new ventures promises additional value creation.
Airbnb, Inc. (ABNB) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 63 hedge fund portfolios held ABNB at the end of the second quarter which was 56 in the previous quarter. While we acknowledge the risk and potential of ABNB as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ABNB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.