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Here's Why Airbnb Could Report Record Revenue in Q3

By Parkev Tatevosian, CFA – Sep 30, 2021 at 8:45AM

Key Points

  • Airbnb management is forecasting record revenue in Q3 of fiscal 2021.
  • Airbnb stock is trading at a price-to-sales ratio of 23, down from 35 earlier in the year.
  • The jump in revenue comes despite continued restrictions on travel worldwide.

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The worldwide travel facilitator is benefiting as folks feel less cautious about leaving their homes.

Most investors would be surprised if Airbnb (ABNB -1.74%), a travel company, reports record revenue in the middle of a worldwide pandemic. After all, the company suffered a substantial drop in revenue during the initial stages of the coronavirus pandemic last year. 

Sure, things have improved for Airbnb as vaccines were approved and the number of fully vaccinated people increased. The fact that folks can find Airbnb properties that are not as crowded as hotels is also helping.

But are things going so well for Airbnb that it can safely forecast a record revenue figure in Q3? Let's take a closer look. 

Two adults and two children unpacking the trunk of a vehicle.

Image source: Getty Images.

Airbnb management is forecasting record revenue

Airbnb's fiscal third quarter (covering July, August, and September) is typically its strongest quarter of the year. The time coincides with the peak northern hemisphere travel season where kids are usually on summer vacation, making the time more convenient for families to take trips away from home. It's certainly encouraging for Airbnb shareholders that management is expecting a record revenue quarter in the strongest quarter of the year. 

In fiscal 2019, Airbnb posted revenue of $1.6 billion in Q3. In 2020, the pandemic disrupted those figures, and revenue dropped to $1.3 billion in Q3. While management did not give a specific dollar figure estimate for revenue in fiscal Q3 2021, Q2 2021's shareholder letter said, " ... we expect Q3 2021 to be our strongest quarterly revenue on record, finishing well above Q3 2019 levels." 

It's impressive the company is beating revenue figures from 2019 despite the current state of the world. Although economies are reopening and restrictions are cautiously lifting, many restrictions are still in place. Sure, billions of doses of vaccines against COVID-19 have been administered, but vast swaths of populations remain unvaccinated either by choice or because of a lack of access in certain countries. 

Airbnb stock is trading at a lower price-to-sales ratio

The market is noticing Airbnb's impressive recovery in the middle of a pandemic. The stock price is up roughly 14.9% year to date. The rise may be justified by revenue that is already higher than before the pandemic's onset. If this is what demand is like for its services in the middle of travel restrictions and fear of a deadly virus, imagine the pent-up demand that will release in 12 to 24 months when -- hopefully -- the world will be further along in its battle against COVID-19.

The stock is not cheap, trading at a price-to-sales ratio of 23. However, it's well below the highs of over 35 it was selling for earlier in the year. So even though its prospects are improving throughout the year, it's trading at a cheaper price. The discount could result from investors' concern with the still high level of coronavirus infections worldwide. Despite the trend turning downward in parts of the world with high vaccination rates, there is still a high caseload of the disease in many parts of the country (and the world). That's certainly a valid concern. Still, investors can place Airbnb on their watch lists and see how the pandemic evolves before adding shares. 

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.

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