Will the Summer Travel Season Set Airbnb on a Bull Run?

After a couple of summers of being cooped up at home, folks are ready to travel again. According to research from Deloitte, an astounding 46% of Americans are planning a trip that involves staying at a hotel or similar accommodation this summer. The boom comes after travel demand crashed in response to the pandemic.

The surge will be great news for Airbnb (ABNB -1.82%), which has already seen revenue eclipse levels from before the pandemic. But will hot demand for travel during the summer be enough to set Airbnb stock on a bull run? Let’s consider its prospects below.

Image source: Getty Images.

Demand for travel is exploding this summer

It’s not just the researchers at Deloitte seeing increasing interest in travel. Target had great news for Airbnb and other travel stocks when it noted luggage sales had leaped 50% in its most recent quarter. The rebound was to be expected. After the outbreak, spending on hotels and resorts fell by a whopping $ 837 billion in 2020. It bounced higher by $ 340 billion in 2021, but that still left the industry roughly $ 500 billion smaller than pre-pandemic.

The recovery looks to be gaining steam in 2022 with increased vaccination rates against COVID-19. Airbnb’s revenue in its most recent quarter, which ended on March 31, was 70% higher than the same quarter last year. What’s more, leading indicators suggest the momentum could continue. Funds held on behalf of customers reached $ 6.1 billion, more than 50% higher than the same time in the previous year when Airbnb held $ 4 billion. The metric measures the value of reservations booked but not yet experienced.

ABNB Revenue (Quarterly) Chart

ABNB Revenue (Quarterly) data by YCharts.

Indeed, management noted that as of April, it had 30% more nights booked for the summer travel season than in 2019, and the rest of the year looks even better than summer. Here’s more detail from the company in its first-quarter shareholder letter:

Heading into peak travel season in Q3 2022, we are seeing substantial demand for summer travel months in EMEA [Europe, Middle East, Asia]and North America. We are also seeing higher than historical demand for Q4, which indicates that consumer confidence to travel remains strong beyond the summer months.

Airbnb stock is cheaper than it’s ever been

ABNB Price to Free Cash Flow Chart

ABNB Price to Free Cash Flow data by YCharts.

So Airbnb’s prospects are excellent as worldwide travel rebounds, but that does not necessarily mean it will boost the stock higher. The company is trading at a price-to-free cash flow ratio of 27 and a price-to-sales ratio of 11. It’s arguably cheaper than ever, and with its future looking so bright, the disconnection is perplexing.

Regardless, investors can buy shares of Airbnb at these bargain prices and patiently wait for the surge in travel demand to boost its revenue and profits. The stock may not jump in the near term, but it will likely be higher three to five years from now than it is today.

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