Airbnb was one of the hottest industry-disrupting technology companies of the last 5 years. But you cannot invest directly in AirBNB stock today as it is a privately held company. Airbnb is due to go public with an IPO in December 2020.
Airbnb was thought to be the hottest US initial public offering (IPO) of the year. The short-term rental platform’s management has announced IPO plans but set no date.
Airbnb could be the third-largest IPO of all time after Ant Group and Saudi Aramco. Saudi Aramco held a $29.4 billion IPO in 2019.
Airbnb could rival Ant’s parent Alibaba (BABA) in size. Alibaba (NYSE: BABA) held a $25 billion IPO in 2014. Ant Group or Ant Financial began as Alibaba’s digital wallet Alipay. Ant now offers a wide variety of financial services to Alibaba customers and others.
Airbnb Stock Symbol
The Airbnb ticker symbol is unknown because Airbnb has not submitted public filings to the US Securities and Exchange Commission (SEC). The SEC is the federal agency that regulates America’s stock markets.
An SEC filing is necessary for an IPO in the United States. Investment banks Goldman Sachs (GS) and Morgan Stanley (MS) will take Airbnb public.
Possible Airbnb ticker symbols could be AIRB and ABNB. I think the AIRB symbol is similar to the name of the European aerospace giant Airbus. Airbus trades on the Paris stock exchange as AIR.
Why Invest in Airbnb Stock?
Airbnb operates a platform that allows owners to rent homes and units on a short-term basis.
A person anywhere in the world can rent a unit for a few days on Airbnb. For instance, an American planning a trip to the United Kingdom can rent an apartment in London for a few days through Airbnb.
Airbnb claimed to offer over seven million listings in over 100,000 cities and over 200 countries and regions in October 2020. Airbnb claims over two million people stayed at its rentals on an average night in 2019.
Airbnb began in 2007 as Airbedandbreakfast.com. Co-founders Brian Chesky and Joe Gebbia started renting their apartment online to raise rent money. The first renter was a person who stated at their apartment in 2007 on a weekend when hotels were booked full because of a convention.
Chesky, Gebbia, and Nate Blecharczyk founded Airbnb in 2008 through the incubator Y Combinator. Airbnb claims over 30,000 houses, 5,000 castles, and 3,000 tree houses are listed on its platform.
Airbnb is one of the fastest-growing companies in the world. Airbnb grew at a rate of 153% between 2009 and 2019, Stratojets estimates. Airbnb’s 2018 growth rate was 40%.
Airbnb has attracted enormous amounts of investment. TPG Capital invested $450 million in Airbnb in 2014, for instance. Google Capital; Alphabet (NASDAQ: GOOG) and Technology Capital Ventures invested $555.4 million in Airbnb in 2016.
Airbnb raised $6.4 billion from Andreesen Horowitz, Sequoia Capital, and General Atlantic. Airbnb’s last funding round was $1 billion in private capital in April 2020.
Airbnb acquired competitor HotetlTonight for $400 million in 2019.
Airbnb Stock Price
Only the Market can determine the Airbnb stock price. I think investors need to be wary of Airbnb because its valuation has fallen in recent years.
Analysts valued Airbnb at $31 billion in March 2017; that number fell to $26 billion in April 2020 and $18 billion in fall 2020. Airbnb’s current $18 billion valuation is below the $25.5 billion value analysts gave it in 2015.
According to the Economist “On November 16th Airbnb unveiled its prospectus, putting it on track for an initial public offering (IPO), just as the first doses of the covid-19 vaccine may become available. The IPO could value Airbnb at more than $30bn. The firm’s longer-term prospects are harder to divine.”
Airbnb has lost value in recent years because of growing opposition to its rentals. Airbnb has faced widespread criticism from people who allege it prices ordinary people out of the rental market.
There have been protests against Airbnb in cities such as Barcelona and Amsterdam. Some municipalities, including New York City, have tried to ban Airbnb or regulate it out of existence.
New York’s City Council has made rentals of less than 30 days illegal, for example. Barcelona’s government requires Airbnb hosts to have a license and refuses to issue new licenses to limit the number of short-term rentals.
Many governments impose taxes on Airbnb. Palm Beach County, Florida, tried to collect its bed or hotel room tax on Airbnb host. Florida’s State Supreme Court has blocked those efforts.
Stock Charts for Airbnb’s Competitors
You can invest today in Airbnb’s competitors, but that is probably not a good idea due to the serious issues the travel and tourism face in 2020 and 2021.
Airbnb Stock Price Prediction
Airbnb’s business has collapsed in 2020 because of COVID-related travel restrictions. Americans cannot travel to many popular Airbnb destinations, including the European Union, Canada, and Japan. The United Kingdom imposes a 14-day quarantine on American visitors.
The number of Airbnb bookings has fallen dramatically because of the coronavirus. CEO Brian Chesky admitted that the number of people staying at Airbnb rentals each night fell to one million in July 2020.
In 2019, Airbnb estimated two million stayed at its rental each night. Chesky also admitted the number of people staying at Airbnb rentals a night was under one million in the second quarter of 2020.
Airbnb’s shrinkage reflects the collapse of air travel. The volume of international air travel could fall from 4.5 billion passengers in 2019 to 2.3 billion in 2020, CNN Business estimates. Airline industry insiders do not expect air travel to return to the 2019 level until 2024.
If those predictions are true, Airbnb may not recover its moneymaking capabilities until 2024 or later. Instead of growth, Airbnb could face a desperate struggle for survival in the next few years.
I think Airbnb’s stock price will be low because its board has approved a two-for-one stock split. That means Airbnb will issue a large number of shares, even though its share price could fall.
After the split, Bloomberg estimated Airbnb’s share price at $34.88 on September 30, 2020. I predict that price could fall to $20 or $15 if the coronavirus pandemic travel restrictions continue.
4 Ways to Invest in Airbnb
1. Wait for the Airbnb IPO
Airbnb is supposed to go public on the NASDAQ by the end of 2020, Reuters speculates. Analysts value the Airbnb IPO between $18 billion and $30 billion. Airbnb’s leadership team hopes to raise $3 billion through the IPO.
The Airbnb IPO will not be the largest of the year. That honor belongs to China’s Ant Group, which analysts value at $34.5 billion. Ant Group attracted $3 trillion in orders for its dual listing in Shanghai and Hong Kong on October 30, 2020. Demand for Ant stock in Shanghai was 870 greater than the supply, Yahoo! Finance claims.
Airbnb has few direct competitors because of its unique business model. No other publicly-traded companies’ short-term rentals in private homes, but some companies operate online travel marketplaces. Those companies include:
2. Invest in Expedia Group Inc. (NASDAQ: EXPE)
Expedia (EXPE) many travel websites that market hotel rooms, vacation homes, airline tickets, and more.
Expedia’s portfolio includes HomeAway, Orbitz, Vrbo, Expedia, Hotels.com, Hotwire, EGENCIA, Travelocity, ebookers, wotif, CheapTickets, Expedia Group Local Expert, CarRentals.com Expedia Media Solutions, Expedia Lodging Partner Group, Expedia Cruises, Classic Vacations, Silver Rail, and Travelldoo.
Expedia shut down its HomeAway US brand in July 2020 to focus on Vrbo and streamline its vacation rental portfolio, a press release states. Expedia is reducing its operations in Airbnb’s business short-term rentals.
Expedia operated over 200 travel booking sites in over 70 countries in 2018. Expedia claimed to offer one million properties, over 500 airlines, over 35,000 activities, over 175 car hire companies, dozens of cruise lines, and over 1.8 million vacation rental listings in 2018.
Expedia reported $99.7 billion in bookings in 2018. Expedia booked 352 million room nights in 2018. Expedia claims that over one-in-three of its transactions were booked on a mobile device in 2018.
I consider Expedia the closest company to Airbnb because it relies on travel bookings for revenue. Both Airbnb and Expedia operate booking platforms. The difference is that Expedia operates many booking platforms, while Airbnb operates one booking platform.
Expedia books several different travel services, including airline tickets, vacation rentals, cruises, rail travel, and hotel rooms. Some investors will prefer Expedia because it is a diversified company.
The key difference between Expedia and Airbnb is that Expedia works with established organizations and companies. Airbnb, in contrast, works with private homeowners.
Expedia is a marketing service for traditional products. Airbnb is offering a new travel experience in the form of private room rentals.
Coronavirus has hit Expedia hard. The Expedia Group’s revenue growth shrank by -82.05% in the quarter ending on June 30, 2020. Expedia’s revenues fell from $2.209 billion on March 31, 2020, to $566 million on June 30, 2020.
The Expedia Group reported a -$1.294 billion quarterly operating loss on March 31, 2020, that fell to -$849 million on June 30, 2020. Expedia’s quarterly gross profit fell from $2.143 billion on December 31, 2019, to $1.58 billion on March 31, 2020, to $177 million on June 30, 2020.
I think Expedia’s losses cast doubt on Airbnb’s business model and the viability of Airbnb’s stock. I estimate Expedia’s revenues fell by over 75% in the second quarter of 2020. I think Airbnb suffered similar losses in the same period.
Expedia is also burning enormous amounts of cash. Expedia reported a negative quarterly operating cash flow of -$1.846 billion on June 30, 2020. Expedia’s quarterly operating cash fell from $341 million on December 31, 2019, to -$784 million on March 31, 2020.
I believe Expedia is only staying in business by borrowing money. Expedia reported a quarterly financing cash flow of $1.517 billion on March 31, 2020 that grew to $3.816 billion on June 30, 2020. I estimate Expedia’s financing cash flow grew by $5.333 billion in two quarters.
Expedia has had to spend its cash to stay in business. Expedia’s quarterly ending cash flow fell from $4.721 billion on March 31, 2020, to $1.645 billion on June 30, 2020.
Expedia’s cash and short-term investments grew from $4.912 billion on March 31, 2020, to $6.786 billion on June 30, 2020. Expedia has more cash, but I think Expedia only has more cash because it is borrowing money.
Expedia’s financials cast doubt upon Airbnb because Expedia operates many travel booking platforms but loses money. Skeptics, such as me, will ask if Expedia loses money with dozens of booking platforms, how can Airbnb make money with one platform.
I think Mr. Market overvalued Expedia shares at $94.15 on October 30, 2020. I consider Expedia overvalued because it loses money and suffers from shrinking revenues.
Expedia could be a good stock if the world recovers from the coronavirus pandemic fast. Expedia paid a 34₵ dividend quarterly on March 9, 2020.
One possible future for an insolvent Airbnb could be as a subsidiary of Expedia. I think Airbnb could fit nicely into Expedia’s portfolio of travel brands.
Other skeptics will wonder if Airbnb’s IPO is a desperate effort to raise enough money to ensure its survival as an independent company. Airbnb’s management could fear they will be unable to borrow money soon and will have to sell the company to avoid bankruptcy. The hope is that the IPO could raise enough cash to sustain Airbnb through the pandemic.
If the IPO fails, I think Airbnb will be sold to a company such as Expedia. I think Expedia has more growth potential than Airbnb because it has some cash.
3. Invest in Uber Technologies Inc. (NYSE: UBER)
The controversial ridesharing and meal-delivery platform offers some similarities to Airbnb.
Like Airbnb, Uber is a platform that markets the services of individual contractors. Both Uber and Airbnb are criticized for exploiting ordinary people and capitalizing on income inequality.
One difference between Uber and Airbnb is that Uber tried to become a technology company. Uber is trying to develop a self-driving car and has experimented with flying cars.
Uber has also tried to experiment beyond ridesharing by experimenting with delivery, meal delivery (UberEATS), and some other service.
Uber (UBER) is one of the most popular visible rideshare apps in the world. At its height in the fourth quarter of 2019, Uber had 111 million active users worldwide, Statista estimates. Uber’s user base fell to 103 million in the 1st Quarter 2020 and the 2nd Quarter of 2020.
Uber loses enormous amounts of money. Uber reported a quarterly operating loss of -$1.263 billion on March 31, 2020, that rose to -$1.607 billion on June 30, 2020.
Uber, like Airbnb, was a fast-growing company before coronavirus. Uber’s revenue growth grew at a rate of 36.82% in the last quarter of 2020. The revenue growth rate fell to 14.33% in the quarter ending on March 31, 2020. Uber’s revenue growth shrank by -29.22% in the quarter ending on June 30, 2020.
Uber burns through enormous amounts of cash. Uber reported a quarter operating cash flow of -$1.071 billion on June 30, 2020. Uber began 2020 with a quarterly operating cash flow of -$1.799 billion on December 31, 2020, that fell to -$463 million on March 31, 2020.
Uber can generate enormous amounts of cash. Uber reported a quarterly ending cash flow of $9.529 billion on March 31, 2020. The quarterly ending cash flow fell to -$1.428 on June 30, 2020. Uber had $7.91 billion in cash and short-term investments on June 30, 2020.
Uber is an unstable company that loses enormous amounts of money and generates huge amounts of cash. I think Uber shows Airbnb will be a lousy stock because Uber loses enormous amounts of money and offers little value to shareholders. Mr. Market priced Uber shares at $33.41 on October 30, 2020.
Investors need to avoid both Uber and Airbnb until those companies show they can make money.
4. Buy Lyft (NYSE: LYFT)
Lyft (LYFT) is America’s second-largest ridesharing platform, with 31% of the US market. Statista estimates Lyft had an annual ridership of 619.4 million in the US.
Lyft generated $39 from its typical passenger ride, Statista estimates. Lyft had two million drivers in the United States in 2019.
Unlike Uber, which operates worldwide, Lyft only operates in two countries, the United States and Canada. Some investors prefer Lyft because it has avoided the controversy and criticism Uber has received.
Lyft is experimenting with electric scooter rentals. Lyft has formed a partnership with the meal delivery platform GrubHub (NYSE: GRUB). Lyft offers unlimited free delivery from restaurants through Lyft Pink.
Lyft Pink is a subscription service that offers unlimited free meal delivery and 15% discounts on Lyft rides. The idea behind Lyft Pink is to give Lyft and GrubHub a new revenue stream in the form of subscription fees.
Lyft has lost enormous amounts of money in 2020. Lyft’s quarterly profit fell from $514.31 million on December 31, 2019, to $87.99 million on June 30, 2020. Lyft’s quarterly revenues fell from $1.017 billion on 31 December 2019 to $339.35 million on June 30, 2020.
Lyft’s quarterly operating loss grew from -$381.81 million on December 31, 2019, to -$487.50 million on June 30, 2020. Lyft burns enormous amounts of cash. Lyft’s negative quarterly operating cash flow grew from -$46.19 million on December 31, 2019, to -$751.72 million on June 30, 2020.
Lyft accumulates some cash but borrows money to stay in operation. Lyft reported a negative quarterly ending cash flow of -$74.46 million and a quarterly financing cash flow of $584.62 million on June 30, 2020.
Lyft had $2.776 billion in cash and short-term investments on June 30, 2020. Lyft is losing value; its total assets fell from $5.572 billion on March 31, 2020, to $5.214 billion on June 30, 2020.
I think Lyft shows the dangers of companies that rely on growth for value. In 2020, Stockrow estimates Lyft’s revenue growth rate fell from 51.9% on December 31, 2019, to 23.15% on March 31, 2020, to -60.97% on June 30, 2020.
Lyft’s experience shows that revenue growth can collapse fast. I think Lyft shows that companies such as Airbnb could be unsustainable. Lyft and Airbnb rely on growth to generate value and attract investment. If the growth ends, the companies lose their value.
Airbnb Stock Outlook
I think investors to stay away from Airbnb and similar stocks because those companies could be incapable of sustainable growth. Without sustainable growth, those companies have no future.
Recent events show that catastrophes such as coronavirus can reverse the growth rate of companies such as Airbnb in a quarter. Investors need to stay away from such companies if they want to keep their money.