Investor interest in Airbnb (ABNB) has risen in 2023 as the company benefits from the travel industry's continued recovery from the pandemic. However, while this company looks promising in the long run, its immediate future faces uncertainty.

It reported its first-quarter 2023 results on May 9. Although the company beat analysts' revenue and earnings forecasts, the stock sunk 11% due to investor dissatisfaction with its projections for the second quarter. So now that the stock has dropped, should you buy the dip?

Here's why this is a great time to consider investing in Airbnb.

It has a growing focus on international growth

The company shifted away from international expansion during the pandemic, as virtually all cross-border travel ceased. However, now that international travel is recovering, management is shifting the company's focus back to investing in global growth. Airbnb's initial focus has involved increasing its marketing efforts in Germany and Brazil to raise awareness of its brand, generate interest in its services, and encourage people to book its listings.

In the first quarter, Airbnb's marketing efforts paid off in a big way by transforming Brazil and Germany into its most rapidly growing global regions. Brazil's gross nights booked rose 114%, and Germany's increased 70% compared to the first quarter of 2019 (pre-pandemic).

The company intends to utilize the marketing strategies that have been so successful in Brazil and Germany to accelerate growth in hundreds of global markets where it still has a small presence. The first region the company has targeted is Asia-Pacific, a massive opportunity management expects will be its fastest-growing international market over the next five years. So, this company is at the beginning of a very long runway for global growth.

It's all about supply and demand

Management discovered an interesting phenomenon during the pandemic in 2020 and 2021: Prices rise when the number of guests desiring places to stay (demand) increases faster than the number of sites available for rent (supply). While this phenomenon results in increased profitability in the short term, it can also cause skyrocketing rental prices, which is terrible in a high-inflation environment. Consequently, the company made increasing the number of hosts and the number of places available to stay one of its top sales growth initiatives, which it has dubbed "mainstreaming hosting."

This hosting initiative simplifies the process of becoming a host by making it easy to list a property while providing tools and resources to help hosts succeed. One of these tools is Air Cover, which gives hosts various protections, including insurance and a 24/7 support team -- something no other company offers, according to CEO Brian Chesky.

The company's active listings increased by 18% year over year in the first quarter of 2023, an acceleration compared to the fourth quarter of 2022, a positive sign for the company. The acceleration suggests its efforts are paying off, and more people are choosing to host on the platform. Moreover, management hopes that this supply expansion will help moderate prices for Airbnb accommodations this summer and encourage new users to try its services.

The cost of staying at an Airbnb can be prohibitive for some travelers. If the company can make its services more affordable, it should attract a whole new group of younger travelers who are often on a tight budget, boosting its overall market share.

It is encountering short-term headwinds

One thing many growth investors hate is a company with rapidly decelerating growth rates, and Airbnb's revenue growth rates are falling off a cliff. For example, revenue grew 70% year over year in the first quarter of 2022, with growth declining to 20% in the first quarter of 2023. Worse, management forecast a revenue range of $2.35 billion to $2.45 billion for the second quarter of 2023, translating to 14% growth over the previous year's comparable quarter at the midpoint -- yikes!

ABNB Revenue (Quarterly YoY Growth) Chart

ABNB Revenue (Quarterly YoY Growth) data by YCharts

The company also gave disappointing news about the "nights and experiences booked" metric, which management expects to look terrible in the second quarter of 2023 compared to the previous year. Nights and experiences booked is a crucial measure of the demand for Airbnb's services, and analysts use it to track the company's growth over time. So this metric underperforming is the last thing shareholders want to see.

Management blames the expected underperformance in the current quarter on the omicron variant pushing people's first-quarter travel plans into the second quarter in 2022, making a tough second-quarter comparison in 2023. However, the good news is that management sees better demand in 2023's second half as growth from its international initiatives kicks in.

Should you buy it?

Airbnb sells at a price-to-free cash flow (P/FCF) of 19.54, which is cheaper than many hotels. The chart below shows that it sells at the lowest P/FCF of this group, yet only Hilton Worldwide has better profitability based on the operating margin.

ABNB Price to Free Cash Flow Chart

ABNB Price to Free Cash Flow data by YCharts

So, the stock is cheap, and with inflation on the decline, the Federal Reserve nearing a pause in interest rate hikes, and the long-term tailwinds from a recovery in travel intact, now may be an opportune time to purchase a few shares before the rest of the market discovers this opportunity.