The slumping stock market appears to have stabilized for the moment. The tight economy and depressing earnings season continue to influence stocks, but investor enthusiasm is making a brave show as it keeps stocks from falling back into a bear market despite the pessimistic outlook.

One stock suffering the market's ups and downs is Airbnb (ABNB -0.74%). After soaring following its initial public offering (IPO), the stock is now down 54% from its 2021 highs. So is now the time to buy?

Need a place to stay?

Lots of people who needed a place to stay over the past two years chose an Airbnb rental, propelling the company to triple-digit revenue growth in 2021 and double-digit growth so far in 2022. The massive rebound was so strong that it turned the company profitable, including net income of $1.2 billion in the 2022 third quarter. Airbnb also generated $960 million in free cash flow in the third quarter and $3.3 billion for the trailing 12 months. In other words, this isn't an anomaly but a sustainably profitable business model.

But it's more than that. At the same time that Airbnb is demonstrating phenomenal results, the travel industry in general is still pressured. Airbnb has a flexible model that can adapt to changing trends, which makes it an exciting case for future growth. As a platform, it can add rooms by signing up hosts in place of building capital-heavy hotels and the like. That leads to better capital efficiency. On top of that, it can offer competitive pricing that's attractive to travelers.

It's no wonder Airbnb has performed so well over the past two years. And there's so much to be confident about for the future. 

A futuristic view of travel

Traditional companies are rarely harbingers of change. They either have no reason to disrupt the status quo, or they have a blind spot about where there might be ruptures in the system, leaving upstarts to notice and fill the gaps. Airbnb is doing a great job of bringing about change in travel, and there are several ways the changes it's bringing about now will serve it well in the long term.

One example is the incredible surge in long-term stays, which have been a huge growth driver for Airbnb. Stays of over 28 days or more have grown to be 20% of all stay types, while stays of seven days or more account for 45%. But it would be a mistake to focus on that category, because the point isn't really in the long stays. It's about the ability to offer new and different experiences that other companies can't match, and to be able to change that according to demand.

That's where Airbnb shines. Management calls these "new-use cases." Another example it gives is non-urban travel. These are locations where large hotel operators simply can't afford to enter. There's not enough demand in each location, and there certainly isn't enough money to build hotels in all of them. But Airbnb can offer accommodations in pretty much any location, including the quirky, like boathouses, tree houses, and even caves.

A no-brainer or a no-gainer?

Management gave a fourth-quarter outlook for further decelerating growth. Revenue is expected to increase 20% year over year, but indications all point to continued growth in nights booked, revenue, and profits. Cross-border travel is still increasing, and longer stays are becoming popular in international locations. Both near term and long term, Airbnb has tons of potential.

But should you buy it now? Let's take a look at valuation.

ABNB PE Ratio Chart

ABNB PE Ratio data by YCharts

Both the price-to-earnings (P/E) and price-to-sales (P/S) ratios have come down substantially, although neither of them is cheap objectively. The way the market looks today, it doesn't look like there's a rush to buy now. At the same time, you can't time the market.

At this valuation, investors are saying there's some premium that's worth paying for Airbnb stock. That means that even though the stock may be expensive, it may not get any cheaper. If you believe in Airbnb's long-term potential and have a long time horizon for the company to realize it, it's worth buying even now.