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Airbnb (ABNB - Free Report) reported earnings earlier this month and smashed analyst expectations, while simultaneously piling up Free Cash Flow. Revenue of $3.4 billion in the quarter came in just above analysts’ estimates and showed an 18% YoY increase.
The big beat was earnings of $6.63 per share, which beat estimates by 208%. Furthermore, Airbnb reported $1.3 billion in FCF for the quarter and $4.2 billion in the trailing twelve months, which is a record for the company.
This figure gives ABNB an incredible 44% TTM FCF margin. This is among the highest in the market, and means the company boasts a 56% net margin.
While all of this is extremely compelling, what makes Airbnb stock so attractive is its incredibly reasonable valuation given EPS growth estimates.
Appealing Valuation
ABNB is trading at just 15x FY23 earnings and a 5.5% Free Cash Flow yield. It has a five-year median earnings multiple of 36.5x, and a median FCF yield of 3.6%, meaning the company is trading well below historical valuations.
At the same time sales this year are forecast to grow 17.4% YoY and 12% next year, while EPS are projected to climb 20% annually over the next 3-5 years.
Based on these estimates ABNB has a PEG ratio of 0.75x, indicating a discounted valuation.
Image Source: Zacks Investment Research
Earnings Estimates
Airbnb currently has a Zacks Rank #3 (Hold) rating, although I would guess that may soon be changing. Understandably, analysts have been hesitant to significantly increase earnings estimates because of the very complicated macroeconomic environment.
However, this most recent report showed just how well the company is executing, and you can see FY23 earnings estimates just shot higher this week by 110%. I wouldn’t be surprised to see more upgrades before the end of the year, which should boost ABNB to a top Zacks rank.
Image Source: Zacks Investment Research
Competitors?
Because of its unique business model, Airbnb has limited direct competitors that are public companies. In some ways it is a similar to the travel booking businesses such as Booking Holdings (BKNG - Free Report) , and in other ways it is like Marriott International (MAR - Free Report) , although ABNB doesn’t own any property directly.
When looking at Marriott International and Booking Holdings, they both appear to have some attractive prospects. It seems the expectations for the travel industry have remained tepid given the economic uncertainty.
Booking Holdings definitely looks more interesting with a forward earnings multiple of 20.7x, and EPS growth forecasts of 21.6% giving it a PEG ratio of just below 1x. BKNG also enjoys a Zacks Rank #2 (Buy) rating.
Marriott International is trading at a one year forward earnings multiple of 23x, which is in line with its five-year median. However, with EPS growth forecasts of 17.4% it has a PEG ratio of 1.3x. MAR also has a Zacks Rank #3 (Hold) rating.
Neither company has quite the appeal of Airbnb at current levels, although neither BKNG nor MAR seem to be exceptionally overvalued, making them worth looking at in more detail.
So long as economic activity doesn’t collapse in the coming months, Airbnb among other travel related companies could see continued earnings growth and beats.
Image Source: Zacks Investment Research
Bottom Line
While it doesn’t yet have a top Zacks rank, Airbnb is building the qualities of a very good investment. Investors who aren’t yet convinced may want to wait until earnings estimates are revised higher again to give it that top Zacks rank, as it would confirm the buy signal and I wouldn’t blame them for waiting.
Nonetheless, it is a stock to keep on the watchlist.
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This Tech Stock is a Screaming Buy
Airbnb (ABNB - Free Report) reported earnings earlier this month and smashed analyst expectations, while simultaneously piling up Free Cash Flow. Revenue of $3.4 billion in the quarter came in just above analysts’ estimates and showed an 18% YoY increase.
The big beat was earnings of $6.63 per share, which beat estimates by 208%. Furthermore, Airbnb reported $1.3 billion in FCF for the quarter and $4.2 billion in the trailing twelve months, which is a record for the company.
This figure gives ABNB an incredible 44% TTM FCF margin. This is among the highest in the market, and means the company boasts a 56% net margin.
While all of this is extremely compelling, what makes Airbnb stock so attractive is its incredibly reasonable valuation given EPS growth estimates.
Appealing Valuation
ABNB is trading at just 15x FY23 earnings and a 5.5% Free Cash Flow yield. It has a five-year median earnings multiple of 36.5x, and a median FCF yield of 3.6%, meaning the company is trading well below historical valuations.
At the same time sales this year are forecast to grow 17.4% YoY and 12% next year, while EPS are projected to climb 20% annually over the next 3-5 years.
Based on these estimates ABNB has a PEG ratio of 0.75x, indicating a discounted valuation.
Image Source: Zacks Investment Research
Earnings Estimates
Airbnb currently has a Zacks Rank #3 (Hold) rating, although I would guess that may soon be changing. Understandably, analysts have been hesitant to significantly increase earnings estimates because of the very complicated macroeconomic environment.
However, this most recent report showed just how well the company is executing, and you can see FY23 earnings estimates just shot higher this week by 110%. I wouldn’t be surprised to see more upgrades before the end of the year, which should boost ABNB to a top Zacks rank.
Image Source: Zacks Investment Research
Competitors?
Because of its unique business model, Airbnb has limited direct competitors that are public companies. In some ways it is a similar to the travel booking businesses such as Booking Holdings (BKNG - Free Report) , and in other ways it is like Marriott International (MAR - Free Report) , although ABNB doesn’t own any property directly.
When looking at Marriott International and Booking Holdings, they both appear to have some attractive prospects. It seems the expectations for the travel industry have remained tepid given the economic uncertainty.
Booking Holdings definitely looks more interesting with a forward earnings multiple of 20.7x, and EPS growth forecasts of 21.6% giving it a PEG ratio of just below 1x. BKNG also enjoys a Zacks Rank #2 (Buy) rating.
Marriott International is trading at a one year forward earnings multiple of 23x, which is in line with its five-year median. However, with EPS growth forecasts of 17.4% it has a PEG ratio of 1.3x. MAR also has a Zacks Rank #3 (Hold) rating.
Neither company has quite the appeal of Airbnb at current levels, although neither BKNG nor MAR seem to be exceptionally overvalued, making them worth looking at in more detail.
So long as economic activity doesn’t collapse in the coming months, Airbnb among other travel related companies could see continued earnings growth and beats.
Image Source: Zacks Investment Research
Bottom Line
While it doesn’t yet have a top Zacks rank, Airbnb is building the qualities of a very good investment. Investors who aren’t yet convinced may want to wait until earnings estimates are revised higher again to give it that top Zacks rank, as it would confirm the buy signal and I wouldn’t blame them for waiting.
Nonetheless, it is a stock to keep on the watchlist.