Here’s why Airbnb could report record third quarter revenue
Most investors would be surprised if Airbnb (NASDAQ: ABNB), a travel agency, posts record revenues amid a global pandemic. After all, the company suffered a substantial drop in revenue during the early stages of the coronavirus pandemic last year.
Of course, things have improved for Airbnb as vaccines have been approved and the number of people fully vaccinated has increased. Also helps that people can find Airbnb properties that aren’t as crowded as hotels.
But are things going so well for Airbnb that it can safely predict record third quarter revenue? Let’s take a closer look.
Airbnb management expects record revenues
Airbnb’s third fiscal quarter (covering July, August, and September) is typically its strongest quarter of the year. The time coincides with the peak travel season in the Northern Hemisphere, where children are typically on summer vacation, making it more convenient for families to take trips away from home. It is certainly encouraging to Airbnb shareholders that management expects a record quarter of earnings in the strongest quarter of the year.
In fiscal 2019, Airbnb reported third quarter revenue of $ 1.6 billion. In 2020, the pandemic disrupted those numbers and revenue fell to $ 1.3 billion in the third quarter. Although management did not provide a specific dollar estimate for Q3 FY2021 revenue, the Q2 2021 letter to shareholders stated: “… we expect making the third quarter of 2021 our highest quarterly revenue ever, ending well above third quarter 2019 levels. ”
It is impressive that the company exceeds 2019 revenue despite the current state of the world. Although the economies are reopening and the restrictions are being lifted cautiously, many restrictions are still in place. Of course, billions of doses of COVID-19 vaccine have been administered, but large swathes of populations remain unvaccinated either by choice or due to lack of access in some countries.
Airbnb stock trades at a lower price-to-sales ratio
The market notices Airbnb’s impressive recovery in the midst of a pandemic. The share price is up around 14.9% year-to-date. The increase can be justified by income already higher than before the start of the pandemic. If this is what demand for its services looks like amid travel restrictions and fear of a deadly virus, imagine the pent-up demand that will be released in 12 to 24 months when – hopefully – the world will be. more advanced in its fight against COVID-19.
The stock is not cheap and is trading at a price-to-sell ratio of 23. However, it is well below the highs of over 35 for which it was selling earlier in the year. So even though its outlook improves throughout the year, it is trading at a lower price. The haircut could result from investor concern over the still high level of coronavirus infections around the world. Despite the downward trend in parts of the world with high vaccination rates, the number of cases of the disease remains high in many parts of the country (and the world). It is certainly a valid concern. Still, investors can put Airbnb on their watchlists and see how the pandemic unfolds before adding shares.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.