What happened
Shares of Airbnb (ABNB +3.21%) were down 13.3% week to date through Thursday's market close, according to data provided by S&P Global Market Intelligence.
The slide coincided with a recent spike in COVID-19 cases, which could potentially dampen demand for travel. Perhaps the bigger news this week was a downgrade from one analyst who doesn't see an attractive risk/reward trade-off at these price levels.
Image source: Getty Images.
So what
The reopening of the economy has been good for business in 2021. Airbnb suffered a severe drop in demand during 2020, but nights and experiences booked on the platform have rebounded strongly this year. In the third quarter, the company reported a robust 67% increase in revenue year over year.
Market participants must weigh Airbnb's near-term and long-term prospects against a high valuation, which seems to be the main reason for the downgrade from RBC Capital Markets analyst Brad Erickson. Airbnb hasn't reported a consistent profit as a public company, yet the stock trades at a rich 18 times trailing-12-month sales. The looming threat from another spike in COVID-19 cases just presents another uncertainty for investors to process.
Now what
Ignoring near-term speed bumps, Airbnb is still solidly positioned for long-term growth. In addition to strength in nights and experiences booked across North America, Europe, the Middle East, and Africa, the company also reported an acceleration in Latin America last quarter.
Two trends that are playing to Airbnb's strengths are remote work and the desire for more flexibility when traveling. By the end of 2022, Gartner expects 31% of all workers globally to work remotely. This trend gives this top travel stock a long runway for growth.
