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Airbnb Q3 Earnings Preview: Look at Booking Growth to Gauge Travel Rebound

By Parkev Tatevosian, CFA – Oct 31, 2021 at 7:50AM

Key Points

  • Analysts expect Airbnb to report revenue of $2 billion and earnings per share of $0.75 in Q3.
  • Increasing vaccination against COVID-19 has been making people more willing to travel.
  • The company's stock is trading at an inexpensive price-to-free-cash-flow ratio.

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The online rental marketplace was hit hard at the onset of the pandemic. Has it regained its lost momentum?

A leading company that helps facilitate property rental bookings worldwide is set to report third-quarter earnings on Nov. 4. Airbnb (ABNB -0.73%) has been in recovery mode from the devastation to its business caused by the coronavirus pandemic. Thursday's report should offer an update on how the recovery is going.

Any recovery for this stock will be based on the theory that, as more people get vaccinated against COVID-19, their willingness to travel will increase. That theory is bolstered by the fact that some travel destinations require the use of planes and trains and situations where close contact with others is inevitable and people want to feel safe doing so.

Those interested in Airbnb stock will want to look at what's reported on booking growth on Thursday to gauge just how strong the appetite is for travel

Two people moving luggage in back of car while child watches.

Airbnb stock is up 16% this year. Image source: Getty Images.

Gross booking value surpasses pre-pandemic level

It's important to remember that Airbnb does not own or operate hotels and resorts. Instead, it runs an online platform that connects people looking to rent out their properties to those seeking places to stay. Airbnb earns revenue through fees it charges both hosts and guests for various services. 

Investors looking to gauge the travel rebound can look to Airbnb's gross booking value as an indicator. In its most recent quarter, ended June 30, Airbnb reported a gross booking value of $13.4 billion. That was 320% higher than the same quarter last year, and more importantly, 37% higher than the same quarter in 2019. Roughly 15% of those gross bookings were taken last quarter through fees and they make up Airbnb's revenue. 

The fact that gross bookings surpassed 2019 levels, as well as 2020 levels, was good news for Airbnb, especially since the pandemic is not over. It suggests there is plenty of pent-up demand for travel, and as folks are getting vaccinated (now at roughly 7 billion doses administered worldwide), that demand should lead to increased bookings.

Airbnb is trading near its lowest price to free cash flow 

Analysts on Wall Street expect Airbnb to report Q3 revenue of $2 billion and earnings per share of $0.75. The third-quarter period includes the peak travel season of July and August, when warm weather collides with kids on break from school, making it ideal for travel.

The company's stock price is up 15.6% year to date, coinciding with increasing vaccination rates worldwide. Still, the company's improving business conditions throughout 2021 have it trading near the lowest price-to-free-cash-flow ratio all year at 71.

In the short term, Airbnb's fortune is very much tied to coronavirus trends. Airbnb can continue to thrive in the longer term as it serves a large addressable market and makes it more convenient and affordable to travel. The company has a strong enough balance sheet to withstand any adverse effects from the pandemic.

Investors can add Airbnb to their list of stocks to watch and look for an opportunity to accumulate 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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