Moving on to earnings, is Airbnb the best stock to ride the travel boom?

  • International hotel bookings and travel volumes to airports increase, leading to positive results for the travel industry in Q1 23
  • Airbnb’s business is expanding and is in good financial shape
  • However, Booking may be a better stock to ride the travel boom due to lower price-to-book ratios, better revenue growth and greater growth potential

With global travel finally getting a long-awaited boost from China’s reopening and consumer prices still rising rapidly in most developed countries, the travel game is back in vogue.

According to the latest statistics from AAA Booking, international hotel bookings are seeing an astonishing increase of over 300% this year compared to 2022. Similarly, the European Airport Trade Body recently reported that 45% of airports have already recovered or exceeded pre-pandemic travel volumes .

This led to a stream of positive results in the hotel and travel bookings industry as early as Q1 23 — typically a weaker quarter for the sector due to the cyclical nature of the business.

Booking Holdings (NASDAQ:BKNG) reported a stunning $3.8 billion in revenue as gross bookings jumped 44% to $39.4 billion for the quarter.

Similarly, Expedia ( NASDAQ:EXPE ) also reported impressive numbers for the quarter, with record revenue of $2.67 billion and gross bookings up 20% to an impressive $29.4 billion.

Now it all comes down to the biggest star of the bunch: Airbnb ( NASDAQ:ABNB ) . After an extremely positive 2022, the company is expected to report earnings of $0.14 per share, which is a significant increase from the -$0.03 reported in the same period last year, but a significant decrease from the $0.48 last quarter.

Source: InvestingPro

Let’s use our InvestingPro tool to take a deep dive into the company’s financials and earnings expectations to answer the question: Is Airbnb the best travel stock to buy now?

InvestingPro users can do the same analysis for any stock in the market simply by signing up for the next IPO in the middle of the pandemic, the California-based company hit the gas in 2022 and delivered its first profitable full year with solid margins.

Get the news you want

Read news about market movements with a personalized feed of stocks that interest you.

Get the app

That is why the company already has an excellent financial result on InvestingPro.

Source: InvestingPro

In fiscal 2022, ABNB’s revenue jumped to $8.4 billion — an impressive 40% year-over-year increase (46% excluding currency effects). This exceptional performance resulted in GAAP-based net income of $1.9 billion.

Source: InvestingPro

The company also reported notable growth in both adjusted EBITDA and free cash flow, reaching $2.9 billion and $3.4 billion, respectively, a positive increase of 49% over the prior year.

Source: InvestingPro

The driving force behind this outstanding success was unwavering guest demand across all regions in 2022. As travelers increasingly ventured across borders and returned to urban destinations, each region witnessed a significant expansion of its platform.

Pending the first quarter earnings report, demand and profitability are expected to continue to grow at a healthy pace. The combination of a favorable macroeconomic environment for the travel industry and strong performance from peer companies has led to four positive revisions to analysts’ EPS expectations versus just one negative over the past 90 days.

h2 Airbnb or Booking? /h2

The bearish argument for Airbnb stock lies in the fact that most of the company’s headwinds are sector-specific. Thus, other less sexy stocks within the travel industry, such as Booking – may provide better price-to-book ratios today.

Airbnb currently trades at 39.9x earnings, which is significantly higher than the competition, as shown by InvestingPro:

source: InvestingPro

On the rest of the ratios, Booking also does a much better job than Airbnb, trading on much healthier margins.

source: InvestingPro

Booking is also beating Airbnb by more than two times when it comes to monetization today, showing that the tech startup still has a long way to go before it can compete with industry giants in terms of cash generation.

Finally, Airbnb’s revenue growth also looks less stable than Booking’s (*ABNB’s revenue on top, Booking’s on the bottom).

source: InvestingPro

These are the reasons why InvestingPro estimates a much higher price for Booking than for Airbnb over the next 12 months (ABNB fair value on top, reservation on bottom).

source: InvestingPro

h2 Bottom row/h2

Make no mistake, Airbnb is a great company with huge growth prospects. Given the current challenging market conditions, however, Booking should remain a much better stock to ride out the travel boom over the medium term.

While I find it likely that ABNB will surprise on the upside with its earnings report tomorrow, the company’s growth prospects may still need time to play out, and the risks ahead of continued higher capex should pose threat for the rest of 2023 — assuming the Fed doesn’t reverse this year. If macro-financial conditions point to a riskier environment again, investors are advised to take a second look at stocks.


Disclosure: The author is long on Booking stock and does not hold ABNB.

Leave a Comment

Your email address will not be published. Required fields are marked *