Airbnb Sees Impressive Demand Recovery

We plan to lift our $75 fair value estimate for narrow-moat Airbnb ABNB by a high-single-digit percentage to account for a stronger recovery in demand, with an expectation that its 2021 bookings can surpass 2019 levels (versus our prior forecast of reaching a low 90s rate). Although the shares are down by the mid-30s since mid-March, we still view them as overvalued, trading around 65 times consensus 2023 enterprise value/EBITDA (Visible Alpha).

Airbnb posted impressive first-quarter bookings that reached 104% of 2019 levels (compared with 52% and 47% for narrow-moat peers Expedia and Booking, respectively), up from 69% last quarter (33% and 35%), as it continued to benefit from the U.S. travel recovery and preference for more staycations. But this demand is not unique to Airbnb, as Expedia is also seeing its U.S. accommodation bookings this summer for beach and mountain destinations above 2019 levels. Also, nights and experiences booked reached a lower 79% of prepandemic levels, versus 61% last quarter. While that is strong demand improvement, we highlight that a meaningful driver of Airbnb’s booking results was nightly rates, which achieved 131% of 2019 levels, driven by a positive mix of larger accommodations in the U.S. We see this rate as unsustainable, as we think improving vaccination rates will cause a global resurgence of travel demand to expand across all types of lower-priced accommodations and regions during 2021-23.

Meanwhile, Airbnb is showcasing improved cost efficiency, with its negative $59 million in first-quarter adjusted EBITDA that is around a $190 million improvement from prepandemic levels. The company continues to invest in building host supply, user experience, and platform support, which we see supporting its network advantage. We don’t plan a meaningful change to our expense forecasts or view that Airbnb can expand its operating margins to the mid-20s by the end of this decade from negative 10% in 2019.

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