Under the right conditions, a platform business can deliver huge returns for investors. By acting as a middleman between buyers and sellers, companies like Airbnb (ABNB 0.75%) and eBay (EBAY 1.32%) earn high margins without taking on risks associated with more-traditional rivals in the e-commerce and hotel industries.
But which stock is the better buy today? eBay and Airbnb both just updated investors on their growth outlook for 2023, so let's compare the two against that wider sales backdrop.
Airbnb is a growth stock
Both companies are in growing industries, but Airbnb will appeal to more growth-focused investors. That's partly because the platform for home and room rentals is earlier on in its expansion story. Sales soared 31% in the most recent quarter, for example, compared with a small decline for eBay.
That difference will be stark in 2023, too. eBay is calling for roughly flat sales in the first quarter, while Airbnb sees revenue rising by between 18% and 23% after accounting for currency exchange swings. The marketplace platform is still dealing with a growth hangover compared with prior phases of the pandemic as its buyer pool is shrinking.
Looking further out, there's a good chance that Airbnb will unlock more revenue streams over time as it makes it easier for people to earn income by hosting guests. "We have some big ideas for where to take Airbnb next," executives told investors in late February. eBay can realistically target more-marginal growth.
eBay is less risky
If you're risk-averse, there are good reasons you might prefer eBay stock over Airbnb's right now. The marketplace platform isn't as exposed to a recession, for example. Travel demand would likely plunge during a sharp economic pullback even as consumers continue shopping for apparel, toys, and electronics.
EBAY operating margin (TTM) data by YCharts. TTM = triling 12 months.
eBay also pays a modest dividend that would cushion returns during a stock market downturn. The business has a longer track record that spans a wide range of selling environments, too, which isn't the case with Airbnb.
Lastly, the stock is valued much more conservatively. You can buy eBay for less than 3 times sales, compared with more than 10 times sales for Airbnb.
The better buy
That elevated valuation means the main risk you're taking on with buying Airbnb is in overpaying for a high-performing business. It's possible that the company will disappoint investors over the next few years, perhaps by showing weaker growth or struggling to keep its fees rising. With an eBay purchase, you're getting far slower sales gains in exchange for less worry about the company not living up to very high expectations.
In that way, eBay is an investment geared more toward value-focused investors who prize stability and cash returns. Airbnb, meanwhile, is a classic growth stock that delivers promise attached to elevated risk.
Yet both businesses demonstrate the financial power of the platform-selling model. And both are profitable and generating ample cash flow today. Those factors should support market-beating returns for shareholders of Airbnb and eBay who are willing to hold the stocks through volatility in 2023 and beyond.
