San Francisco-based vacation rental company Airbnb, Inc. (ABNB) offers a platform that allows bookings for stays, vacations, and experiences. It brings hosts and guests together online or via mobile devices. ABNB anticipates its revenue will increase by 56% – 64% year-over-year in the coming quarter. This prediction comes as Russia’s invasion of Ukraine continues to wreak havoc on European travel. Indeed, the company stated that many of its customers booked Airbnb properties in Ukraine when the crisis erupted to give money to Ukrainian hosts, even though they had no intention of actually traveling there.

However, the stock is down 30.3% in price year-to-date and 28.6% over the past month to close yesterday’s trading session at $116.13. In addition, its shares are currently trading 45.4% below their 52-week high of 212.58.

While Airbnb had 30% more nights booked for the summer travel season at the end of April compared to the same period in 2019, it still confronts regulatory obstacles and competition from cheaper hotels and traditional online travel companies.

Here is what could shape ABNB’s performance in the near term:

Impressive Financials

ABNB’s revenue grew 70.1% year-over-year to $1.51 billion for the three months ended March 31, 2022. The company’s Nights and Experiences Booked increased by 59% year-over-year to $102.1 million. The robust improvement in Nights and Experiences booked and much higher average daily rates contributed to a 67% year-over-year rise in gross booking value to $17.2 billion. Its net loss narrowed 98.4% from the year-ago value to $18.79 million.

Stretched Valuation

In terms of forward Non-GAAP P/E, the stock is currently trading at 48.75x, which is 311.4% higher than the 11.85x industry average. Also, its 8.34x forward EV/Sales is 676.8% higher than the 1.07x industry average. Furthermore, ABNB’s 8.93x forward Price/Sales is 917.4% higher than the 0.88x industry average.

POWR Ratings Reflect Uncertainty

ABNB has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ABNB has a D grade for Value and Stability. The company’s higher than industry valuation is consistent with the Value grade. In addition, the Stability grade exhibits the stock’s higher volatility than its peers.

Among  the 22 stocks in the C-rated Travel – Hotels/Resorts industry, ABNB is ranked #7.

Beyond what I have stated above, one can view ABNB ratings for Growth, Momentum, Quality, and Sentiment here.

Bottom Line

While ABNB has made several critical strategic moves that have helped it outperform its competition, certain major challenges and impending Federal Reserve decisions on interest rate increases  continue to keep investors cautious. Investors appear to believe that travel will be more susceptible to this shift than other sectors of the economy. In addition, the stock is currently trading below its 50-day and 200-day moving averages of $156.81 and $163.71, respectively, indicating a bearish sentiment. So, we think investors should wait before scooping its shares.

How Does Airbnb Inc. (ABNB) Stack Up Against its Peers?

While ABNB has an overall C rating, one might want to consider its industry peers, Bluegreen Vacations Holding Corp. (BVH), which has an overall A (Strong Buy) rating, and InterContinental Hotels Group (IHG), and Target Hospitality Corp. (TH), which have an overall B (Buy) rating.

Note that TH is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.

ABNB shares fell $2.13 (-1.83%) in premarket trading Wednesday. Year-to-date, ABNB has declined -29.21%, versus a -14.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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