If you want to become a millionaire, the right path probably involves some collection of growth stocks with an attached set of risks. If you're well-diversified, the money you can make from stocks that soar is far higher than the money you're likely to lose from poor picks. Your top stocks can grow your money many times over, but you can only lose the money you put into losing stocks once.
Airbnb (ABNB -0.14%) has been on the market for a year now, and the stock has since gained a respectable 26%, double the gain for the S&P 500 over the same period.That's impressive, considering it went public when it was posting year-over-year sales declines in the face of a global pandemic. Now that sales are on the increase again, is this a growth stock that's likely to bolster your chances of becoming a millionaire?
Why this travel stock could be big
Airbnb is a vacation rental platform, and it differs from traditional travel companies in significant ways. Its core product is a platform where hosts can connect with travelers, which means it doesn't develop large hotels or deal with customers directly. But like other travel companies, business suffered during the global travel restrictions. However, due to its disruptive model, where customers can stay in private residences and book a rental in a local location, sales recovered fairly quickly. In the 2020 fourth quarter, sales fell 22% year over year, but they rebounded to a 5% increase in the 2021 first quarter, and have been growing from there. Net loss also contracted over the three quarters before the company posted a profit in the 2021 third quarter.
|Metric||Q3 2021||Q2 2021||Q1 2021||Q4 2020|
|Sales growth (YoY)||67%||299%||5%||(22)%|
|Net income||$834 million||($68 million)||($1.2 billion)||($3.9 billion)|
The third quarter set records for sales and income, but it's more than a pandemic rebound. Travel is changing. And in some ways, Airbnb is becoming more than a travel stock, servicing a large subset of customers who are looking for a new way to live. The company's fastest growing segment is stays of 28 days or more, accounting for 20% of total gross nights booked in Q3. People are seeing Airbnb as opening up new opportunities to live around the world, experiencing new cultures or working from home in new environments. That makes Airbnb's vacation rentals about more than travel, and this is a trend that is intensifying as the home office becomes de rigueur.
But let's step back for a moment and judge Airbnb as a disruptor in traditional travel. It's compelling as a growth engine for several reasons. It grows its residences as fast as it grows its host list, or hosts expand their own businesses. Many hosts have made a lucrative business out of marketing rentals through Airbnb's platform, and they help grow Airbnb through the focus on their own business, much like an organic growth market. In Q3, hosts made a record $12.8 billion, a 27% increase over the Q3 2019 figure. Airbnb's new winter upgrade added 50 improvements over its May upgrade, which added 100 features, making it even easier for hosts to get going and and benefiting the company as well.
The company also benefited as travelers pivoted to domestic locations when the world shut down. As global travel came to a halt (and is still not back to pre-pandemic levels), Airbnb was able to offer rentals close to home and in non-urban areas. That's something big hotel companies can't do.
Will Airbnb stock help you become a millionaire?
Airbnb has strong sales growth and increasing profits. It's not cheap, trading at 21 times sales because there's strong investor confidence in the company's prospects. While the stock is up for the year, it's down 17% over the past month likely due to Omicron fears. Management is expecting Q4 revenue to increase 66% at the midpoint. Things are looking up for the stock, and although there may be hiccups, the long-term outlook is solid.
But can it make you become a millionaire by 2030? Let's say you invest $10,000 at today's price of $159. You'd get roughly 63 shares. To turn your investment into $1 million, it would need to grow 10,000% over the next nine years. That kind of growth is pretty unlikely.
However, I think it's possible for Airbnb stock to be a multibagger and get you a great return on your investment. For example, for your investment to become a 10-bagger, you'd have to start with $100,000 to become a millionaire from Airbnb stock. But in the $10,000 example, your 63 shares would turn into $100,000. A 10-bagger stock is definitely a great investment, and that might be within Airbnb's potential. Getting back to the original thesis, if Airbnb stock is part of a broader, well-diversified mix of growth stocks, it can definitely put you on the road to becoming a millionaire by 2030.