Nearly 1 Year After Its IPO, 3 Investors Discuss Airbnb Stock

Thinking about investing in Airbnb (ABNB -1.52%)? The company has had a great few quarters, and is not only seeing incredible revenue growth but is also insanely profitable.

In this segment of Backstage Pass, recorded on Nov. 15, Motley Fool contributors Rachel Warren, Jason Hall, and Danny Vena reflect on the company's initial public offering last year and its track record of growth in a challenging pandemic environment. 

Rachel Warren: Airbnb went public last December in a very momentous IPO. It's interesting. I did not follow this IPO super closely at the time that it occurred. But since then, I have started following this stock very closely.

I was saying to someone recently, jokingly, I need to stop talking about it on these shows so that I can actually invest in [LAUGHTER] this company because I love the business model. I personally have been a long-time customer of Airbnb. I've lived all over the world the last several years and often in Airbnbs so I'm one of those long-stay statistics you read about.

Jason Hall: That's my favorite data. That's the one piece of data I have to read every time they report, is that four-plus weeks cohorts. I love hearing that piece, that data point about where the business is because there's all the other trends. This just is really cool. Go ahead. I had to say that.

Warren: Oh, sure. No, it's great. I actually will say, before I dive into a little bit more of the financials here, I think one of the things I really like about Airbnb's business model is that it really fits into this very changing dynamic we're seeing in not only the way people are traveling but also the way people are living their lives. In terms of travel, it's starting back up again for sure. It's not like it was pre-pandemic.

I think people like the fact that maybe versus staying at a hotel, whether you're concerned about COVID measures, or you just missed the comforts of home, at an Airbnb, whether you're staying for a few days, a few weeks, or longer, you can have those comforts of home wherever it is you're choosing to visit.

Then as well now as we're seeing more and more workers looking for flexible options and perhaps the ability to live where they want, not so much based on where they work, Airbnbs can be a great way to do that. You may live in a big city, and you decide, I want to go out to the mountain for a month, or I want to go be by the beach.

You can find a place on Airbnb and do that as long as you want. Airbnb was founded in 2008. Before the pandemic, I'm sure, this number has changed, but this was the most recent one I could find, pre-pandemic, Airbnb captured more than 20% of the entire vacation rental market. 

You can bet that number has increased exponentially over the last couple of years. I think the thing I found interesting was that Airbnb entered the market at a very fragile time for the U.S. travel industry. 

Things were not looking good a year ago, and it still had this really incredible entry to the market. It priced its IPO at $68 a share, opened at $146 a share, and it reached a market capital of $100 billion on its first day of trading. Go ahead.

Danny Vena: I was going to say this is one of those companies from last year that we saw, toward the end of last year, where not only did they ratchet up the price range a couple of times before actually going public and then priced it above what they originally planned to price above that range, but then it skyrocketed.

Didn't this company have triple-digit gains on its first day in the market?

Warren: Yes. I believe so.

Vena: Some percent?

Warren: Yes. It was incredible.

Hall: It was absolutely bananas.

Warren: One of the biggest IPOs of the year by far. What's interesting is when I was putting this graph here in the slide, we know that it had this huge entry to the market. Then earlier this year, especially in the summertime when things were looking really iffy with COVID, shares dropped a bit.

I think some investors were maybe a little concerned as far as how much the company could rebound which it has. But the share price, I think, has really started to catch up with the company's long-term growth potential over the past few months.

I was surprised to see how well it's done compared to the broader market, so really great company. The company reported just a little background, revenue of $4.8 billion in 2019.

In 2020, its revenue, not surprisingly, dropped 30% year-over-year, but all things considered, it could have been worse. I don't know what you guys think, but I felt like 30% did not worry me as much, considering how other travel companies were doing last year.

Hall: To me, I just viewed it as it's a great business with temporary problems. By going public when it did, had plenty of cash on the balance sheet, no real financial risk, it was just a matter of getting through that period and seeing how the business did. 

Every quarter that it's reported, once things have become more opened up, it has just been more and more impressive.

Warren: Oh yeah. Absolutely.