New Trade for June 14th, 2021

Stocks were flat to start the week as several potential market moving factors are expected to take shape in the coming days. The Federal Reserve is in focus as investors await results from their June meeting which are due out Wednesday.  Investors will be looking for clues as to when the Fed will start to taper back the bond-buying program that was initiated to provide liquidity during the pandemic.  

Enthusiasm was through the roof when today’s featured stock made its debut.  But since then the share price has settled, offering up a more attractive entry for investors who are looking to get in before the stock makes its next run.  

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 price has lost more than 30% since then.  Airbnb, like many other high-risk, high-reward stocks, may have lost appeal with value investors.  But it has also created a more attractive entry for the stock’s many fans.  

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 a recent interview 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.  

Despite being a household name in the global travel industry, it’s captured less than 1% of its total addressable market.  That leaves a lot of room for growth in the long run. Investors who want to play on the expanding popularity of consumer travel may be interested in ABNB shares.

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