Shares in accommodation and experiences specialist Airbnb (NASDAQ: ABNB) are having a great run at the moment. Over the last three months, the ABNB share price has climbed from around $150 to $200.
I’ve said before that Airbnb appears to have a lot of potential from an investment point of view. However, I’ve never hit the ‘buy’ button and actually picked up stock. Is now the right time? Let’s take a look.
Airbnb: strong Q3 earnings
Airbnb’s most recent results, for the third quarter of 2021, showed the company has a lot of momentum right now.
For the quarter, the group generated record revenue of $2.2bn, up nearly 70% year-on-year, and up 36% on Q3 2019. Meanwhile, net income came in at a record $834m, up 280% year-on-year. Total nights and experiences booked were 79.7m, up 29% year-on-year.
Looking ahead, Airbnb said that it expects Q4 revenues of around $1.4bn-$1.5bn, which would take full-year revenues to around $5.8bn-$5.9bn.
What stands out to me here is that revenues for 2021 are expected to be well above 2019 levels ($4.8bn). That’s very impressive. I say this because the majority of the major hotel chains aren’t expected to generate revenue anywhere near 2019 levels this year.
For example, UK-listed InterContinental Hotels Group, which owns a range of top hotel brands including InterContinental, Holiday Inn and Kimpton, is expected to generate revenue of $1.5bn this year, versus $4.6bn in 2019. It’s a similar story for Hilton and Marriott.
This suggests Airbnb is capturing significant market share from the traditional hotel operators.
ABNB share price targets raised
Since Airbnb posted its Q3 earnings, a number of Wall Street firms have raised their price targets for the stock. One such broker is Susquehanna, which raised its price target to $235 from $200, saying ABNB is a “must-own stock for the recovery given its strong positioning, long-term opportunity, and profitability improvements.”
Another is JP Morgan, which increased its price target to $195 from $170. Its analysts said the company looks set to benefit from shifting consumer preferences, such as a move towards non-urban destinations and alternative accommodation.
Overall, broker sentiment towards Airbnb stock appears to be very positive right now after the company’s Q3 results.
Should I buy Airbnb stock now?
I still have some concerns over the stock’s valuation however. After the recent share price rise, Airbnb now sports a market-cap of a whopping $126 billion. That means that the stock has a forward-looking price-to-sales ratio of about 22. That’s high and it doesn’t leave a huge margin of safety. If the company has a bad quarter, the share price could take a big hit.
There are a few other risks here as well. One is new regulation that could impact hosts. Another is potential lawsuits from unhappy customers.
So should I buy shares now? I’m certainly tempted to initiate a small position here. However, I’m going to hold off for now and wait for a more attractive entry point.
All things considered, I think there are better growth stocks I could buy right now.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended Airbnb, Inc. and InterContinental Hotels Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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