Airbnb (ABNB -0.41%) and Uber Technologies (UBER -0.43%) both disrupted mature markets with their streamlined apps. Airbnb challenged hotels by letting people rent out their own properties, while Uber challenged taxis by allowing nearly anyone to become a paid driver. Uber Eats also became one of the world's largest food delivery services.
Airbnb's stock price has dipped 7% over the past 12 months, making it one of the market's more resilient growth stocks, but Uber's stock has declined nearly 50%. Let's see why Airbnb outperformed Uber by such a wide margin, and if it will continue to generate bigger gains for the foreseeable future.
How did Airbnb resist the sell-off in growth stocks?
Airbnb struggled during the pandemic as global travel ground to a halt, but its post-lockdown recoveries in terms of gross booking value (GBV), total nights and experiences booked, and total revenue have been remarkable:
|Segment||2020 YOY Change||2021 YOY Change|
|Gross booking value||(37%)||96%|
|Nights and experiences||(41%)||56%|
Analysts expect Airbnb's revenue to rise 31% to $7.9 billion this year as more countries end their COVID-19 restrictions.
Its business model is also naturally resistant to inflation for two simple reasons: Budget-conscious travelers will gravitate toward cheaper Airbnb accommodations instead of pricier hotels, and property owners will rent out more properties to generate more passive income.
But it still faces other longer-term threats -- including tighter regulations for short-term rentals, competition from cheaper hotel chains, and the growth of short-term rental platforms backed by online travel agencies. Those potential threats haven't dented its bottom line yet. Airbnb's net loss narrowed from $4.6 billion in 2020 (including $2.8 billion in stock-based compensation related to its initial public offering) to just $352 million in 2021.
On an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis, it posted its first annual profit of $1.6 billion in 2021, compared to an adjusted EBITDA loss of $251 million in 2020. Analysts expect its adjusted EBITDA to rise 33% to $2.1 billion in 2022.
The resilience of Airbnb's business enabled it to weather the recent downturn in most high-growth tech stocks, which can be largely attributed to inflation, rising interest rates, and other macroeconomic shocks.
Why did investors lose interest in Uber?
Uber's growth trajectory initially looks similar to Airbnb's. Its growth slowed down significantly in 2020, as a big jump in Uber Eats orders failed to offset its loss of Uber rides throughout the pandemic. But that balance was restored in 2021 as the lockdown measures were relaxed.
|Segment||2020 YOY Change||2021 YOY Change|
Analysts expect Uber's revenue to rise 55% to $27.1 billion in 2022 as its post-lockdown recovery continues.
Its net loss also narrowed from $6.8 billion in 2020 to just $496 million in 2021 as it cut costs, divested its weaker overseas units, and sold its unprofitable advanced technology group (ATG) business, which had been primarily developing autonomous vehicles, to Aurora Innovation.
On an adjusted EBITDA basis, its loss narrowed from $2.5 billion in 2020 to $774 million in 2021, and it even turned profitable by that measure in both the third and fourth quarters of the year. Analysts expect it to post a positive adjusted EBITDA of $1.3 billion in 2022.
That outlook seems rosy, but Uber faces two major headwinds that don't affect Airbnb. First, inflation poses a major challenge for Uber as fuel costs rise. Uber recently added fuel surcharges to cushion the blow for its drivers and couriers, but those higher prices could also alienate its customers.
Second, Uber faces ongoing calls to reclassify its drivers from independent contractors to full-time employees. Those demands could gain more steam as inflation reduces the average spending power of its contract workers.
The valuations and verdict
Airbnb trades at 14 times this year's sales, which indicates investors are willing to pay a premium for its inflation-resistant business. Uber trades at just two times this year's sales, which suggests investors aren't bullish about its future as higher fuel costs ripple through its entire business.
Uber might look like the cheaper stock, especially after it got cut in half over the past 12 months, but Airbnb is clearly the better long-term investment. The strength of its brand, the simplicity of its business model, and its resistance to macro headwinds all make it a great stock to buy right now.