New Trade for May 18th, 2021

Stocks pared early gains and turned flat for the morning after negative U.S. housing starts data.  Housing starts plunged 9.5% last month — a deeper than expected drop, and a bitter pill for markets to swallow.  The steep drop can be attributed to a materials and labor shortage.  There’s no telling where today’s session will lead.   

The pandemic has wreaked havoc on businesses all across the world.  It’s been particularly challenging for businesses that rely on people leaving their homes. According to the World Tourism & Tourism Council, COVID cost the travel sector $4.5 trillion last year.  As restrictions get lifted and vaccinations roll out, a significant travel rebound is likely in 2021.  

Our trade alert highlights a silicon valley darling that stands to benefit from a boost in travel.



Even as other tourism companies battled to survive the pandemic, Airbnb (ABNB) made a huge market debut last year.  In February, Airbnb stock topped $220, more than double its listing price.  However, Airbnb‘s stock has dropped by 40% since then. The stock is currently trading at the lowest levels since December 2020.  Airbnb, like many other high-risk, high-reward stocks, has lost appeal with value investors.  It has, however, created a more attractive entry for the stock’s many fans.  

For anyone who isn’t yet familiar with this poster child for the sharing economy — in short, travelers can use Airbnb to arrange vacation homestays and tourism activities via a virtual travel-focused marketplace.  To give you a sense of size, the company has a global network of 4 million hosts spread across 100,000 locations.  Investors who want to play on the expanding popularity of consumer travel may be interested in ABNB shares.

At the pandemic’s peak, Airbnb had to gather emergency funds and cut a fourth of its personnel.  These efforts were pivotal in helping Airbnb recover from the “most harrowing crisis of our lifetime,” according to CEO Brian Chesky.  Airbnb’s income was $3.4 billion at the end of the year, down 30% from the previous year.  That’s impressive, given that the company had expected revenue to drop by more than 50% in 2020.

Revenue increased 5% year over year to $887 million in the first quarter of 2021, easily above Wall Street projections.  Airbnb attributed this to a 35% increase in overall average daily rates, as most of its bookings were in the United States (which tends to have higher daily rates).  There were also fewer cancellations this quarter than the year before.

Chesky appears to be optimistic about the company’s future prospects.  In an interview with Yahoo Finance last week he identified a crucial travel pattern that could be long-term.  According to data from Airbnb’s most recent fiscal quarter, enthusiastic visitors are already taking short “staycations” fewer than 50 miles from home.  

Furthermore, a quarter of these stays were for 28 days or more. This, according to Chesky, demonstrates customers’ rising interest in lengthier vacation stays. When you combine all of this with the fact that Airbnb’s recent quarter revenue exceeded analysts’ expectations, things could be looking bright for the company.  

In the long run, Airbnb has plenty of room to grow.  Despite being a household name in the global travel industry, it’s captured less than 1% of its total addressable market.  The median price target among the 27 analysts offering recommendations for ABNB stock is $174, which represents a ~31% increase from its current price.  

Where to invest $1,000 right now...

Before you consider buying Airbnb, you'll want to see this.

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And it's not Airbnb.

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Keith say’s he thinks investors will be able to turn a small $50 stake into $150,000.

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But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.

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