Airbnb (ABNB 4.27%) has been on quite a ride since the COVID-19 pandemic kneecapped the travel industry in 2020. For a while, the online marketplace for short- and long-term homestays and experiences' very survival was brought into question. Over the past few years, the company has proven itself to be incredibly resilient, bouncing back stronger than ever as global travel returns to its former heights.
Let's take a look at why adding Airbnb to your stock watchlist could be a smart move right now.
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Airbnb ended 2022 with a bang
When the COVID-19 pandemic hit in 2020, it hit Airbnb right in the face. As countries enacted travel restrictions, demand for travel and accommodations plummeted, leading to a sharp decline in Airbnb's bookings and revenue. At the worst point, the company reported a 72% booking decline.
Nobody knew what the world would look like after the height of the pandemic. Would people still travel as much and be willing to live in strangers' houses? These questions were crucial since Airbnb's business model faced an existential threat.
Fortunately, the dire situation did not last that long. In 2021, Airbnb's revenue surged 77% to a high of $6 billion -- outperforming its previous peak of $4.8 billion, reached in 2019. The rebound was a testament to Airbnb's business model's resilience, underscoring the human need to travel and connect with others.
And if the bears had any doubt about the sustainability of Airbnb's performance, they would have been astonished by the company's 2022 performance. Revenue surged 40% to $8.4 billion, and net income came in at $1.9 billion. 2022 also marked Airbnb's first profitable year.
When Airbnb went public in 2020, it faced a once-in-a-century pandemic that threatened its survival. But today, investors no longer doubt the company's relevance in the travel industry.
The future looks promising for the company
Airbnb might have delivered a solid performance in 2022, but investors are getting increasingly uneasy amid the growing challenges in the economy overall. The continuing war in Ukraine, growing inflation, layoffs in the tech sector, and the still ongoing pandemic are all worrisome.
Despite that, Airbnb expects its strong performance to continue in 2023. In fact, the company guided for revenue in the first quarter of 2023 to grow between 16% and 21%. While it's not hard to foresee that the company will eventually face headwinds, so far, it is still doing fine.
On top of that, the company seems well-positioned to grow in the longer term by surfing the tailwind of a growing global tourism industry. To this end, the company is constantly experimenting with new services to help consumers find their perfect vacation, including experiences and longer-term stays.
To put the opportunity into perspective, Airbnb estimated its total addressable market (TAM) at $3.4 trillion. And with its gross booking of $63.2 billion in 2022, the company has just barely reached 2% market share. The company can grow its business 10 times in size and still not saturate its opportunity.
Generally, it's difficult for investors to find large, well-established companies that can still grow a lot. Airbnb might be that rare gem.
Airbnb just made it into my watch list
The near term might be challenging for the travel industry as a whole.
Still, Airbnb's future looks promising. Its business model has proven to be resilient, and it demonstrated the ability to adapt to volatile circumstances. With a large addressable market and a growing range of services, Airbnb has the potential to continue to grow and capture market share.
For these reasons, I think it's best to keep a close eye on Airbnb as it navigates the post-pandemic travel landscape.
