The wild swings in the market over the past few months give investors the opportunity to find some great stocks for sale. It also means stocks continue to fall, and watching your most confident stocks plunge in price can be both confusing and scary. But if you keep an eye on the objective and pick stocks with strong fundamentals, you can get some great deals that should go up in value over time.
Airbnb (ABNB 0.36%) is a stock that is showing spectacular growth at the same time as its stock price is falling, providing investors with a great opportunity to buy a monster growth stock on sale.
At the forefront of the new way of traveling
Airbnb is not your grandfather’s travel agency. It does not own or operate any hotels or transportation services; rather, it runs a platform that connects hosts and travelers. Simple as it sounds, it has exploded in popularity as the skies begin to open up again.
It has a powerful combination of leadership through innovative travel solutions and traditional travel benefits. This has fueled its business in these challenging times, giving it strong potential for future growth.
For traditional travel, it’s still out of the box. It does not operate any hotels, but rather provides a means of facilitating vacation rentals for vacationers. It was its main driver of growth before the pandemic. But times have changed dramatically in the past couple of years, and it’s uniquely positioned to benefit from changing travel and even lifestyle habits.
Airbnb is working with several developing trends, such as non-urban vacations and work-from-home shifts. In the first quarter, non-urban gross room nights booked continued to grow from pre-pandemic levels, increasing 80% compared to the first quarter of 2019. Long-term stays are still the fastest growing category. fast, reaching record levels in the first quarter of 2022.
And while these remain an important part of the company’s business, other categories are coming back. Urban gross nights booked increased 80% year-over-year, outpacing the first quarter of 2019. Cross-border gross nights more than tripled year-over-year, approaching figures for before the pandemic. Short stays also rebounded year over year.
Airbnb’s ability to grow its platform as a small-cap company has also contributed to its success. It offers rentals in 100,000 cities, unmatched by any hotel operator, and it ended the first quarter with more than 6 million active listings.
The aggregate numbers tell a compelling story. Revenue grew 70% year-over-year to $1.5 billion, and nights and experiences booked increased 60%. The company’s net loss of $19 million was a big improvement from $1.2 billion last year. Those numbers easily top 2019’s performance, and Airbnb is well past a pandemic rebound.
Why is the stock falling?
In some ways, this is an easy stock to own. At the same time, there are concerns to watch, mainly the high valuation of the stock. Airbnb shares floated on the stock market at a high valuation. Even at the current price, which is down 34% this year and 24% since its day one closing price, it is trading at 59 times earnings in the coming year.
It is part of a group of once high-flying growth stocks that investors couldn’t get enough of, but whose valuations have soared beyond reason. Now those have mostly fallen and Airbnb has fallen at the same rate. Some of these growth stocks are bleeding money, with losses mounting, even as they see their growth rate decelerate sharply.
Airbnb stands out because its revenue growth is still robust and losses are shrinking year over year or turning into revenue. Unit variable costs have fallen as the business has grown – and as it enters the busy summer season, management expects revenue as a percentage of gross booking value to increase.
With growth still going strong, there is a premium on Airbnb shares that is warranted. At this price, investors should consider buying.