Airbnb (ABNB -1.98%) shares are up a whopping 34% in 2023 (as of April 5), easily outpacing the Nasdaq Composite Index, a sign that investors are starting to warm up to growth tech stocks once again. This follows a tumultuous 2022 when the stock was down a jaw-dropping 49%. Shareholder optimism appears to be heading in the right direction. 

To its credit, this leading travel company is benefiting from powerful momentum right now as it reported outstanding financial results for the last quarter and year thanks to strong demand. So, is Airbnb stock a buy now? Let's take a closer look at what investors need to know before making an informed decision. 

Airbnb is posting phenomenal growth 

In the most recent quarter (the fourth quarter of 2022 ended Dec. 31), Airbnb generated $1.9 billion of revenue, good for a year-over-year increase of 24%. For the full year, sales were up 40% following a 77% jump in 2021. Two of the company's key business metrics, which are nights and experiences booked and gross booking value (GBV), also registered wonderful gains. During 2022, 393.7 million nights and experiences were booked on the platform for a total GBV of $63.2 billion. 

Demand is clearly robust right now, boosted by travelers visiting major cities again, with cross-border travel also surging. This was Airbnb's strength prior to the pandemic. "And looking forward, we're already seeing some really strong demand in Q1," CEO Brian Chesky mentioned on the Q4 2022 earnings call. Consumer confidence to travel remains really high." 

Investors might assume that a business growing as rapidly as Airbnb might be many years away from achieving positive net income. After all, this is usually how it works. Companies invest heavily to pursue growth at all costs, and they try to convince shareholders that at some point in the future, whenever that may be, profitability will be met. Owning these types of stocks might have worked in the past, but with macroeconomic uncertainty being the main topic of conversation, investors are starting to crave positive net income now.  

In Airbnb's case, there seems to be nothing to worry about in this regard. 2022 was the first profitable year for the company. And in Q4, net income of $319 million was up 480% year over year. This is a much leaner organization nowadays, helping to bolster that bottom-line figure. As of Dec. 31, Airbnb had 5% fewer employees than it did at the end of 2019 despite 75% higher revenue. And the company's operating margin expanded from 10.4% in 2019 to 21.5% last year. Becoming more optimized and efficient is a very favorable trend for this business.

In addition to strong profit growth, free cash flow (FCF) soared 21% in Q4 (compared to Q4 2021) to total $455 million. And for the full year, Airbnb was able to produce $3.4 billion of positive FCF, an incredibly encouraging sign for investors. This is possible because the company's capital expenditures, as measured by purchases of property and equipment, were just $25 million in 2022. What's more, having $7.4 billion of cash and cash equivalents and just $2 billion of long-term debt (as of Dec. 31) is a good position for the business to be in from a balance sheet perspective. 

It's critical to assess the valuation 

It's strikingly clear that Airbnb is firing on all cylinders, benefiting from a resurgence in travel demand. Moreover, the growing popularity of remote work is a tailwind that could boost the company for many years to come. In addition, Airbnb has already proven that its platform-like business model scales extremely well in a profitable manner. These are extremely attractive traits investors should love about the company. 

However, looking at Airbnb's fundamental performance and qualitative characteristics is only part of the task. Investors must also consider the valuation to avoid the risk of overpaying for a company. As of this writing, Airbnb shares are still 22% off their IPO price despite a sizable run-up so far in 2023. And the stock now trades at a price-to-earnings (P/E) ratio of 40. This is below the stock's historical average multiple of 64. 

Nonetheless, paying a P/E of 40 is a big ask for shareholders. But this is a category-creating company, one that is a market leader in its industry that's positioned for outsized gains in the future. This simple truth might be enough to nudge investors to buy the stock.