Airbnb (ABNB 0.10%) made a dramatic recovery from the pandemic last year, although its stock has reacted inversely; after soaring post its initial public offering (IPO), when the company was posting sales declines, the stock price is now down 32% in 2022 as it continues to demonstrate robust growth.
There might be several explanations for this. The skyrocketing valuation needed some readjustment, and growth stocks are out of favor in an unstable macro environment. And perhaps key is that management is expecting growth to slow down. After an enormous rebound, is Airbnb still a growth stock?
A resilient model
Airbnb demonstrated its market power last year as it began to recover even when travel was curtailed. In the 2021 second quarter, a nearly 300% year-over-year sales increase completely obliterated pandemic declines, soaring 10% higher than the 2019 number. It maintained high-growth levels throughout the past year, culminating in a 58% year-over-year sales increase in 2022's Q2.
The company's differentiated travel model has proven to be an enormous success, standing out in particular during the pandemic. Travelers flocked to its accessible locations when travel restrictions kept many traditional accommodation options closed, and guests have booked visits for longer-term stays. Airbnb's simple formula took vacation rentals, previously a fragmented cottage industry, and unified them into one place with rules and reviews for a more trustworthy and pleasant experience. The flywheel effect means that as more people explore the listings, more hosts sign on with more listings, bringing in more viewers. Management continues to upgrade the platform for both hosts and vacationers with summer and winter "releases."
Some noteworthy results from Q2 include 103 million nights and experiences booked, its highest-ever quarterly number, and net income of $379 million. Airbnb generated $2.9 billion in the trailing 12 months, ending Q2 with $10 billion in cash on its balance sheet.
Is its market saturated?
Even the formidable Airbnb isn't forecasting high growth for the near future. Management is guiding for a 24% to 29% sales increase to around $2.8 billion, which would be its highest-ever quarterly sales. However, that's a marked slowdown from some of the faster year-over-year sales increases over the past year. Yet Airbnb is also expecting to maintain profitability, and that's what investors should be looking for.
What does that mean for future growth opportunities? I think there are still plenty of ways for Airbnb to grow. The travel industry it expected to be a more than $700 billion market in 2022, according to Statista, and grow at a compound annual growth rate (CAGR) of 8.5%, reaching nearly $1 trillion by 2026. As big as it is now, Airbnb has a tiny slice. As it continues to grow at a faster rate than most of its competitors, it's grabbing important market share. Seventy-three percent of all travel and tourism revenue is expected to be online by 2026, giving Airbnb an edge next to traditional competitors.
It's also still on the smaller size relative to some of its competition, such as Marriot International, Booking Holdings, Hilton Worldwide Holdings, and Hyatt Hotels.
ABNB Revenue (TTM) data by YCharts
Lots of growth at a slow pace
Growth is decelerating from rebound levels, but it's strong and expected to stay that way. The Wall Street average revenue consensus is a 42% increase over 2021 levels this year.
As travel continues to gain strength and Airbnb introduces new features and improvements on its platform, it has a long growth runway ahead. It may be past triple-digit growth, but this disruptive company has massive potential.
