The bear market has swept up good and bad companies alike, and Airbnb (ABNB 1.17%) has been no exception. The short-term rental website has seen its shares slump more than 45% over the trailing 12 months as investors worry about a pullback in travel.

But as the end of 2022 draws near, investors would do well to take a closer look at the company. Smart management decisions and a resilience to macroeconomic conditions make Airbnb a buy while it's still available at a discount.

Strong results against difficult headwinds

Given the geopolitical and macroeconomic headwinds, many consumer-facing businesses have cited softening spending to explain their disappointing results. Airbnb has seen success in spite of those challenges. Revenue for the third quarter of 2022 was the highest it's ever been at $2.9 billion, which was a 29% year-over-year increase. This was on top of 67% revenue growth in the third quarter of 2021.

This revenue result was driven by several important metrics. "Nights and experiences booked" increased 25% to 99.7 million. Meanwhile, the average daily rate inched up 5% to $156. This led to gross booking value of $16 billion, up 31% over the year-ago quarter. Airbnb also saw impressive growth on its bottom line. Net income grew 46% to a record-setting $1.2 billion, and the company generated $960 million in free cash flow.

All these metrics point to one fact: Airbnb has not seen any appreciable slowdown in the use of its platform despite this difficult economy.

Even with these record-setting results, it's worth noting the impact that the strong dollar has had on Airbnb's results. Here are these same year-over-year growth rates with and without this impact.

 

3Q 2022 Result as Reported

Excluding Foreign Exchange Impact

Revenue

29%

36%

Average daily rate

5%

12%

Gross booking value

31%

40%

Net income

46%

61%

Data source: Airbnb.

This impact is important to note as it has been a real headwind to the company's results. Looking at the growth rates -- excluding the impact of foreign exchange rates -- highlights how strong the demand for Airbnb's platform was this past quarter.

Addressing user complaints

While Airbnb is a very successful platform for both travelers and those looking to host guests in their home, there have been some consistent complaints that have dampened investor enthusiasm. So over the past several months, the company has released several new features in an attempt to improve the platform experience.

One common complaint from users has been surprise pricing. This occurs when the price shown while browsing does not include various fees, making it difficult to compare the real price when searching for locations for a stay. On the third-quarter earnings call, CEO Brian Chesky said the company will be moving to an all-in pricing model, where you see the final price rather than only the nightly rate. Chesky called transparency on pricing a "north star" for the company.

To address another common complaint, Airbnb has also released a feature called AirCover, which is essentially a free insurance policy for both hosts and guests. This feature was introduced several months ago, but was expanded as part of Airbnb's winter release of new features. AirCover for Hosts has been expanded to include an identity verification system for guests and damage protection up to $3 million that includes coverage for cars, boats, art, and valuables. 

Growing hosts on the platform

In the third quarter report, Airbnb noted that approximately 35% of new hosts on the platform started as guests. So there's already an internal network effect that is driving growth in the number of hosts. However, management believes that just like during the 2008 financial crisis, the current economy could mean more hosts as more people put their homes on Airbnb for supplemental income.

The company sees this as an opportunity and has released Airbnb Setup. This new feature, also announced as part of the platform's winter revisions, is designed to make it very easy to list a home on the platform. Airbnb Setup includes one-on-one guidance from an experienced host (called a Superhost) and allows new hosts to choose an experienced guest for their first stay. The hope is that these experienced hosts with good track records can help eliminate first-time nerves for new listers. 

These changes show that even while posting record growth, strong profitability, and consistent cash generation, Airbnb is responsive to its users and wants to continually improve the platform for both hosts and guests. 

Why is Airbnb a buy now?

Airbnb's growth is clear, yet the stock is down 43% year to date. The valuation has followed the same trajectory. The shares currently trade for 7.8 times sales and 20 times free cash flow. Neither of these multiples would be considered cheap, but they are both near all-time lows. 

The current valuation is reasonable for a company putting up such solid growth on both the top and bottom lines; setting records for revenue and net income deserves a premium. I believe now is a great time to buy the shares. If Airbnb puts up results in 2023 like it did in 2022, this valuation is likely to start heading in the other direction.