Airbnb Stock: Buy, Sell, or Hold?

For a company as well-known as Airbnb (ABNB 0.75%), it's hard to believe that it's only been a public company for less than three years. It's also hard to believe that over that time frame, Airbnb's stock is down 14% while the S&P 500 has risen 23%.

While that may be surprising at first, it's important to remember that it's been a wild ride for the travel industry since the world was shut down and then reopened due to the pandemic. In fact, the news for Airbnb's stock has gotten much better more recently. Year to date, the stock is up 46% versus the market's 15% gain.

The good news for Airbnb is that its business performance has been much more consistent than its stock performance. With Q2 2023 results reported recently, let's dig in and see if Airbnb is a buy, sell, or hold right now.

The platform is growing and improving

One of the most straightforward metrics to keep track of for Airbnb is the number of nights and experiences booked. As the name suggests, this is the clearest indication of the use of the Airbnb platform over time. This number has grown steadily each quarter, but due to the seasonality of the business, let's look specifically at Q2 results over time.

Data source: Airbnb.

The 115 million nights and experiences booked in Q2 of 2023 represented an 11% year-over-year increase, which is even more impressive considering it was a difficult comparison for the company. In the year-ago quarter, nights and experiences booked grew by 25%.

Of particular interest is the growth of cross-border nights booked, which grew by 16% year over year. This metric has yet to return to its pre-pandemic levels, but travel to the Asia Pacific region increased by 80% in Q2 of 2023 compared to the year-ago quarter. This is something to watch moving forward as international expansion is a goal of the company.

Airbnb has also been very responsive to user needs and complaints. With each of its updates, the company typically addresses a pain point for users or adds features that can drive future growth. Two examples of this are transparent pricing for guests and pricing tools for hosts.

In its winter 2022 release, Airbnb added new pricing features that allow guests to see the total cost of a listing, inclusive of all fees and taxes. This addressed a common complaint about hidden charges as well as the challenges of comparing listings.

In the summer 2023 release, the company added pricing tools for hosts that help them set more competitive pricing. This is an important recognition of a challenge with the platform as 58% of hosts had complained about this issue. Early feedback from hosts about the latest changes has been positive.

Keeping an eye on slowing growth

As strong as the results were in the second quarter of 2023, there are some trends worth keeping an eye on. Consider the rate of growth for revenue, nights and experiences booked, and gross booking value over the past three years.

Data source: Airbnb. YOY = year over year. 

To be fair, Airbnb has been a public company for less than three years, most of which was during a global pandemic. It's going to take a while to see what "normal" revenue growth can be over time. That said, it's worth watching these trends over the coming quarters. Whether these metrics level off, reverse, or continue to slide will be a factor in the performance of the returns for shareholders.

Consider a small position 

In my view, Airbnb stock is a buy. While not cheap, consider these valuation metrics compared to their historical averages.

ABNB PS Ratio data by YCharts

Granted, future performance will depend on the trends above continuing in the right direction. Additionally, the stock could still fall more and get cheaper. In my view, taking a small position now is a good risk/reward proposition. That said, recession fears could be a reason to wait and see. Either course of action is justifiable right now.