Airbnb (ABNB) recently released its earnings report, exceeding analysts’ expectations and demonstrating impressive free cash flow generation. The company reported a quarterly revenue of $3.4 billion, representing an 18% year-over-year increase, and an earnings per share of $6.63, surpassing estimates by 208%. Moreover, Airbnb reported a record-breaking $1.3 billion in free cash flow for the quarter and $4.2 billion in the trailing twelve months, leading to an exceptional 44% free cash flow margin and a 56% net margin.
The stock’s compelling nature lies within its attractive valuation relative to its projected earnings per share (EPS) growth. With ABNB trading at just 15x FY23 earnings and a 5.5% free cash flow yield, well below its historical valuations, the company offers significant upside potential. Analysts forecast a 17.4% year-over-year sales growth and a 20% annual EPS growth over the next 3-5 years, resulting in a PEG ratio of 0.75x, indicating a discounted valuation.
Despite its positive performance, Airbnb holds a Zacks Rank #3 (Hold) rating; however, recent developments suggest a potential upgrade to a top Zacks rank in the near future. The company’s unique business model presents limited direct competitors among public companies. While Booking Holdings (BKNG) and Marriott International (MAR) display compelling prospects, neither can match Airbnb’s current appeal levels, making ABNB a standout option in the market.
Overall, Airbnb is positioned as a promising investment, especially with the potential of future earnings estimate upgrades. Investors should keep a close eye on this stock for any developments that could further enhance its status as a top investment opportunity.
Competitors’ Analysis
Booking Holdings displays an attractive forward earnings multiple of 20.7x and a PEG ratio just below 1x, while also holding a Zacks Rank #2 (Buy) rating. On the other hand, Marriott International trades at a one-year forward earnings multiple of 23x, with a PEG ratio of 1.3x and a Zacks Rank #3 (Hold) rating. While these companies exhibit potential, neither appears exceptionally overvalued, making them worth monitoring for potential investment opportunities.
It is important to note that continued earnings growth and outperformance can be expected for Airbnb and other travel-related companies, pending stable economic activity in the coming months.
Final Thoughts
Though Airbnb is yet to attain a top Zacks rank, it presents the qualities of a strong investment that should not be overlooked. While investors may choose to wait for further earnings estimate revisions to confirm the buy signal, Airbnb’s stock is certainly one to watch closely.
Disclaimer: This is an independent analysis expressed by the author, and it does not necessarily reflect the views of Nasdaq, Inc.
