Many of the companies that struggled at the peak of the pandemic are now seeing their businesses rebound. That's what is happening with Airbnb (ABNB 1.09%), which runs a vacation rental platform. For obvious reasons, traveling wasn't popular when COVID-19 first struck and lockdowns ensued.
Things are different now: People are traveling again, and Airbnb is benefiting. But can the company maintain its momentum for a while, or will its fortunes continue to fluctuate the way they have over the past three years? Let's look deeper into Airbnb's business and figure out whether its shares are worth buying today.
Airbnb's latest results: Growth across the board
Last year, economic conditions were difficult for most people, especially amid 40-year-high inflation. And in such an environment, traveling is not always at the top of the list of things they want to spend money on. And a war led to Airbnb shutting down its business in Russia and Belarus.
None of that did much to hinder the company's progress in 2022, as the results show. Last year, Airbnb showed solid increases in practically every category. Annual revenue jumped to $8.4 billion, a 40% year-over-year increase and 75% higher than the last year before the pandemic, 2019. The number of nights and experiences booked increased to 393.7 million, 31% higher than in 2021 and 20% higher than in 2019.
Net income soared to $1.9 billion after being negative in 2019 and 2021. Free cash flow of $3.4 billion was also significantly higher than the previous year and three years ago.
Several things worked in Airbnb's favor leading to these blowout results. First, the company pointed to the continued rebound in cross-border travel, which significantly decreased during 2020 and 2021. Even with an economy that's far from perfect, many consumers seem adamant about wanting to do things they couldn't do during much of the pandemic's height.
Second, many people seek extra cash during downturns. Posting one's home as a potential vacation rental isn't a bad way to earn it. Airbnb ended the year with 6.6 million hostings, a 16% increase year over year (minus some listings in China that it removed). With an increase in travel and more hosts on the platform (providing more choices for consumers), everyone wins, including Airbnb.
The long-term view
The good thing about Airbnb's business is that people won't stop traveling any time soon. And as long as they continue to do so, they will need to make travel arrangements, including a place to stay. Traditional hotels have long been the go-to option here, but Airbnb offers a more homey environment, along with privacy and amenities often lacking in hotels, which many people enjoy.
Catering to the needs of its clients is one of Airbnb's greatest strengths. As CEO Brian Chesky said during the fourth-quarter earnings conference call:
We want people to love our service, and that means obsessing over every single detail. And we listen to our host and guest. And based on their feedback, we're making a large number of upgrades to our service this year, including improving customer service, making it easier to find the right home, and delivering greater value, and much, much more.
This has already translated to numerous upgrades and innovations. Last year, the company introduced Airbnb-Friendly Apartments, a service that helps those interested in hosting on the platform find a place to live that will allow them to do that at least part-time or when they are away.
Here, the goal is to help as many people as possible enjoy the benefits of hosting on Airbnb (and the extra cash it comes with) while giving guests even more options. In 2021, Airbnb launched several initiatives directed at travelers, including a flexible destination option for those more interested in staying in unique places (treehouses included) than in specific cities.
Chesky's comments indicate that the company isn't done innovating. With customer-centric initiatives, Airbnb will continue expanding the number of hosts and guests on its platform, strengthening its competitive edge -- also known as the network effect.
All these factors will allow revenue, earnings, and free cash flow to continue trending upward. The company's results might be inflated right now because guests were starving to travel again after the restraints of 2020 and 2021. Even so, Airbnb's long-term opportunities look exciting, making it an excellent tech stock to buy now.
