Airbnb valuation normalizes as fundamentals catch up
The bull case argued for Airbnb is that its valuation has normalized to a reasonable mid-twenties multiple, making it an attractive long-term compounder supported by strong network effects.
The argument
The guests argued that the stock's flat performance since its IPO was primarily due to initial overvaluation of over 100 times operating cash flow. Now trading at a mid-twenties multiple on enterprise value to operating profit, the business is positioned to grow earnings faster than revenues due to operating leverage.
The thesis, stress-tested
✓ What validates it
- ✓Successful monetization of the services marketplace toward a target of $1 billion in annual revenue
- ✓Expansion and deeper penetration into countries outside of its top five core markets
- ✓Rollout of sponsored listings and advertising tools for professional hosts
▸ Risks discussed
- ▸Regulatory overhang and local short-term rental restrictions
- ▸Consumer pushback regarding hidden fees and inconsistent listing quality
- ▸Dependence on regulatory tolerance compared to traditional hotel aggregators
Hear it yourself
"So that seems like a very, very reasonable price to me for a product that has such strong network effects in its favor, is so widely loved by consumers, and is also just getting more profitable as the business continues to scale, because it is this traditional tech platform marketplace ecosystem where you can essentially grow earnings…"
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