My top growth stock to buy now is a travel company thriving as consumers unleash pent-up demand to get out of their homes. Airbnb (ABNB 1.17%) is experiencing a surge in customer spending that could last a while.
The asset-light business offers advantages over traditional hotels and resorts, with customers choosing it over its competitors. Airbnb's stock is relatively inexpensive, and the rebound in consumer travel has a long way to run.
The rebound in travel is great news for Airbnb
Notably, Airbnb operates as a travel facilitator. That means it does not own any properties listed on its platform. It brings together travelers looking for a place to stay with hosts looking for people to rent their spaces. Airbnb facilitates transactions. For its services, it takes a percentage of all sales on the Airbnb platform. Of course, the business was devastated at the pandemic's onset when travel came to a halt. Airbnb's revenue fell by 30% in 2020.
According to Statista, consumer spending on hotels and resorts crashed below $1 trillion in 2020, down from $1.5 trillion in 2019. As economies reopened, travel restrictions eased, and vaccinations against COVID-19 became widespread, travel spending rebounded in 2021. Airbnb capitalized on this trend, and its revenue exploded by 77% in 2021. The market is estimated to reach $1.1 trillion in 2022.
ABNB Revenue (Quarterly) data by YCharts
Still, travel expenditures are nearly $400 billion lower than before the pandemic, suggesting more room for this rebound to last, and Airbnb can ride that wave higher. In the first half of 2022, Airbnb reported sales of $3.6 billion. In the same period last year, it earned $2.2 billion. Booming sales have allowed Airbnb to turn the corner on profitability. Last year it lost $498 million in income from operations -- this year it earned $364 million.
But it's not just the rising tide that is lifting Airbnb higher. The company's business model of facilitating travel has encouraged millions of hosts to list unique properties that attract customers. Travel is rarely a one-size-fits-all transaction, but that's how most hotels and resorts are built -- with cookie-cutter rooms. On Airbnb, folks can rent a room in an apartment or an entire home in the suburbs, depending on their needs. The customer-value proposition is proving advantageous, as Airbnb's revenue has grown faster than the industry.
It's a great time to buy Airbnb stock
ABNB Price to Free Cash Flow data by YCharts
In addition to its excellent prospects, Airbnb's stock is relatively inexpensive. With its price-to-earnings ratio of 68 and price-to-free-cash-flow ratio of 52, folks can now buy Airbnb's stock at close to its lowest prices according to these metrics. It should come as no surprise that Airbnb is my top growth stock to buy now.
