Airbnb (ABNB 0.68%) is scheduled to report first-quarter 2022 earnings after the markets close on Tuesday, May 3. The travel facilitator was devastated at the pandemic's onset as consumer mobility decreased.
Now that billions of people have been vaccinated and are feeling safer leaving their homes, Airbnb is recovering stronger than ever. For the first time in its history, the company has reported two consecutive quarters of profits. Investors will be watching to see if it can maintain that streak when it releases Q1 earnings.
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Airbnb is growing faster than the travel industry
Note that Airbnb's business is seasonal. The bulk of its revenue and profit is earned during the busy summer season when the weather is warm and kids are home from school. That was certainly the case again in 2021. Airbnb made a net profit of $834 million in the third quarter, which ended Sept. 30, compared to a net profit of $55 million in the fourth quarter, which ended Dec. 31. Similarly, revenue decreased from $2.2 billion in Q3 to $1.5 billion in Q4. However, even though seasonality caused a decrease quarter over quarter, the results were significant improvements from the prior year.
Worldwide spending on hotels and resorts cratered in 2020 to $610 billion from $1.47 trillion in 2019. It bounced back to $950 billion in 2021, but it's still far from recovering entirely from the pandemic. The good news for Airbnb is that its 2021 revenue of $5.99 billion was comfortably ahead of the $4.8 billion it earned in 2019. So while the industry as a whole has not bounced back, Airbnb is more robust than before the outbreak.
ABNB Revenue (Quarterly) data by YCharts
That can partly be attributed to Airbnb's business model. It does not own any of the listings on its platform. Instead, it encourages transactions between those looking for a place to stay and those with properties they want to rent out. When customer demand increases, hosts list more properties more often. The business structure allows supply to adjust quickly, responding to market demand. That's in stark contrast to traditional hotels and resorts with little flexibility. If demand surges beyond existing capacity, it will take time to erect structures with rooms for guests to reserve.
And customer demand is surging with spending rising by $340 billion in 2021 from 2020. What's more, the industry is still $600 billion short of pre-pandemic levels, suggesting more pent-up demand could be unleashed over the next couple of years. Even if Airbnb falls short of profitability on the bottom line in Q1, its prospects are excellent for the next several years.
What this could mean for Airbnb investors
Analysts on Wall Street expect Airbnb to report revenue of $1.45 billion and a loss per share of $0.28. If the company meets those projections, it will represent increases of 63.8% and 85.6%, respectively, from the same period the year before. Notably, it would also end its streak of two consecutive quarters of profits on the bottom line.
ABNB Price to Free Cash Flow data by YCharts
Nevertheless, that should not discourage long-term investors from buying Airbnb stock. Over the next several years, the business has excellent prospects as travel demand surges higher, and the shares are trading near their lowest level relative to free cash flow.
