This year has not been kind to investors. Seemingly every asset is down considerably, leaving investors few places to hide from the shellacking. For those brave enough to jump in and start buying the dip, Airbnb (ABNB 1.09%) might be one of the biggest winners in the aftermath of the current bear market.
The worldwide travel facilitator is thriving as folks are taking long-delayed vacations. Revenge travel, as some call it in the industry, is surging after consumers were forced to stay indoors longer than they would have liked. Meanwhile, Airbnb's stock is down 57% off its highs. The mismatch between its prospects and price could offer investors an excellent opportunity to capitalize.
Revenue and cash flow are expanding briskly
Airbnb's recovery from the slowdown during lockdowns started in earnest in the June quarter of 2021, when revenue exploded by 298% from the same quarter the year before. The momentum has continued, growing by 67%, 78%, and 70% year over year in the following three quarters.
ABNB Revenue (Quarterly YOY Growth) data by YCharts.
Airbnb's business model puts it in a great position to thrive along with rising travel demand. It does not own any of the listings on its platform. Instead, it encourages hosts to list places to stay on the website, which get booked by folks looking to travel. Airbnb takes a percentage of all transactions for its services. How does that help it in times of surging demand? Unlike traditional hotel or resort businesses, it does not need to invest significantly to build rooms to capitalize on the growth.
Speaking of industry growth, spending on hotels and resorts fell by almost $900 billion in 2020. The following year was better as widespread vaccination made folks more comfortable leaving their homes, but the $340 billion increase still left the industry considerably below pre-pandemic levels. That highlights there could be significant pent-up demand for travel that could be unleashed throughout 2022.
ABNB Cash from Operations (Quarterly) data by YCharts.
Airbnb's rising revenue has already helped it boost cash flow from operations. The metric jumped to $1.2 billion in its most recent quarter ended in March, nearly double the $618 million in the same quarter the year before. If its revenue keeps growing at anywhere near its pace over the past several quarters, cash from operations could continue surging higher. And with industry demand still recovering from pre-pandemic drops, it is reasonable to assume Airbnb will continue growing briskly.
Excellent prospects at a bargain price
ABNB Price to Free Cash Flow data by YCharts.
While Airbnb's prospects have been improving with the economic reopening, its stock price has been falling. That's an opportunity for long-term investors. Trading at a price-to-free-cash-flow ratio of 21.6, Airbnb is arguably cheaper than it's ever been. Excellent prospects at a bargain valuation are why Airbnb could be one of the biggest winners of the 2022 bear market.
