A new approach to vacationing
Jamie Louko (Airbnb): With the market’s wild volatility, high-quality and low-quality tech stocks alike seem to be dropping. This can be painful for long-term investors, but it also provides opportunities to add more to your highest conviction investments. Airbnb is one for me because it is continuing to disrupt the way consumers search for vacations.
Airbnb thrives on uniqueness and having features that are unrivaled by traditional competitors. The company has one of the most extensive and creative catalogs of listings, with over 6 million active listings, ranging from mini-islands to treehouses to cave-homes. It also has features that have never been incorporated into traditional processes for booking vacations like “I’m Flexible” and Categories. These features are unique to Airbnb and allow consumers to decide where to stay based on factors other than location and specific vacation dates.
With this unique business model, Airbnb has gathered quite the brand reputation. In Q1 2022, the company had over 102 million nights and experiences booked on the platform, which grew 59% year over year. This was the first time the company surpassed 100 million nights booked. The company’s Q1 revenue also grew 70% year over year to $1.5 billion. While some of this growth is likely partially due to the pent-up demand for travel, it still signals that the company’s competitive advantages are attracting more consumers to the platform.
This adoption should continue over both the short and long term. The company is guiding for $2.08 billion in revenue in Q2, representing a 56% expansion year over year. Over the long term, the company will have to continue innovating to create a top-tier platform, but Airbnb generated more than $2.8 billion in free cash flow during the trailing 12 months to invest in its platform. This grew over 600% year over year, and with this much reinvestment, Airbnb could strengthen both its competitive advantages and its brand.
With shares valued at 28 times free cash flow, Airbnb looks fairly valued today. Continued revenue and nights booked expansion will show that Airbnb’s reputation is building, and with its one-of-a-kind platform, I think Airbnb could be a great investment to buy and never sell.
