Airbnb is set to go public this week, with shares scheduled to begin trading on Thursday. The home-sharing company is aiming for a price range of $44-$55 apiece, which would value it between $26.4 billion to $29.8 billion. David Trainer, New Constructs founder and CEO, says the IPO is reasonably valued.
“Unlike other recent IPOs, and several stocks where valuations are sky-high, Airbnb has a plausible path to profitability,” wrote Trainer in a recent note.
The equities analyst said that if Airbnb maintains its revenue growth similar to what is saw before the pandemic, while lowering its marketing expenses, it will be valued at around $28 billion, the midpoint of its IPO price range.
If the firm doubles down on cost efficiency, while sacrificing revenue growth, and were to achieve profitability on par with Booking Holdings, one of the most profitable travel firms, Airbnb could be worth $58.7 billion, he added.
Trainer highlighted that Airbnb has the largest platform for room listings of many of its competitors, and it benefits from its scale. The more listings there are on the platform, the more consumers will look to Airbnb, which in turn will drive more property owners to host on the platform to reach the largest audience.
Just before the pandemic, Airbnb was flying high. Sales in 2019 came in at $4.7 billion, up from $3.6 billion the previous year. But, in the first nine months of 2020, pandemic headwinds put the brakes on this growth train. Not only did the top line fall significantly, but losses accelerated as well.
For the nine-month period ending Sept. 30, the company’s sales came in at $2.5 billion, a more than 32% year-over-year decline. Losses more than doubled to $697 million.
And, while Airbnb has adapted to the current environment, it’s still a long road to full recovery. With strict lockdowns back in effect in states like California, travel demand for both business and leisure remains depressed in many major U.S. destinations.
Many restrictions on international travel remain in effect as well. And although a vaccine may seemingly be around the corner, supplies may be limited until next summer. At best, things could be getting back to the old normal by the end of 2021.
