Airbnb poised for growth

This is my first post after lurking for a long time, sorry if it doesn’t fit along with the others.

One of my bigger positions, aside from the SaaS companies everyone always talks about on this board (CRWD, DDOG, NET) is ABNB. I wanted to get the thoughts of some of the other folks on this board.

My bullish indicators:

  • Airbnb cut their marketing budget by over 50% during Covid, naturally, in order to save on unnecessary costs, and after the Q2 Covid peak, saw they still generated 95% of the traffic they did with the same marketing budget (https://www.campaignlive.co.uk/article/airbnb-slashes-spend-…). This speaks to the brand recognition they posses, and ability to scale without expensive customer acquisition costs. This type of experiment with marketing budget is incredibly drastic, and no company would normally be able to run it, but Airbnb did with tremendous results, now giving them the ability to save ~50% on their marketing budget.
  • Airbnb’s non-GAAP adjusted EBITDA is actually very promising, even with COVID taken into consideration. Look at their net income/(loss) for each quarter in 2019 vs 2020:
    2019----2020
    (247k)----(334k)
    (42k)----(397k)
    313k----501k
    (276k)----(20k)
    Interestingly their Q3 & Q4 look INCREDIBLY strong in 2020 compared to 2019, with the exception of Q2, they’re actually performing better in Q3 & Q4 despite most countries still experiencing a net decrease in travel. If I’m to believe this, Airbnb’s non-GAAP EBITDA is actually HIGHER in 2020 than 2019. NUTS!!
  • Airbnb has a huge moat that will make competing with them incredibly difficult. There are 4 million Airbnb hosts globally (according to the CEO during earnings), which gives them an incredibly strong network effect. Why bother to list a house on a competing platform when the traffic to Airbnb will be what drives all of your rentals / bookings? And why, as a traveler, use a different site when Airbnb already has such a huge base of homes to rent? It’s a vicious growth cycle that’s great for business and keeps users and hosts in the loop. Another thing is the Experiences segment. Airbnb is not breaking this out yet, but I believe the expansion into a related vacation service makes their platform even more sticky, for both hosts and travelers.
  • Airbnb is not just for people on vacation. According to their earnings call there was “strong retention” on the platform and uses beyond vacations, especially long term rentals, and domestic business travel. If you get a budget from your company to travel for work, would you rather spend $300 / night in a 9’x9’ hotel room or rent an entire penthouse apartment (depending on the city)?

My bearish indicators:

  • They are not expanding into other segments as fast as I would like to see. Maybe it’s demanding too much, but I can imagine all the places Airbnb expands to, becoming a ubiquitous platform for housing, temporary, long term, vacation, rental, rent-to-buy, etc. Maybe I’m wrong with that as a longterm goal for the company, but their expansion to Experiences was incredible for their growth, and I would like to see similar tangential use cases enabled by their platform.

Sorry for the post formatting, I couldn’t quite figure out how TMF allows post formats, since it wasn’t HTML or Markdown, Google was not much help either -_-

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Hello Mandeville,

Welcome to Saul’s Board and Congratulations on your very first Fool post. You’ll get an A for effort as well courage!

As you realized, proper formatting and spacing would help readability. Are you using a smartphone? TMF doesn’t have a functional mobile app (they are working on it), so proper formatting is probably difficult if not impossible using a smartphone. I’ve never attempted it. Since I don’t own a tablet, I don’t know if you encounter the same problem using it.

Here are TMF Discussion Board Basics as I outlined yesterday in For Board Newcomers & all others (https://discussion.fool.com/for-board-newcomers-all-others-34765…:slight_smile:

“““We recommend using a computer and not a smartphone as TMF does not have a functional mobile app, making navigating the website difficult and frustrating. This link will lead you to articles on how to write a post https://support.fool.com/hc/en-us/sections/360005717094-Disc…, including an article on formatting, https://support.fool.com/hc/en-us/articles/360000244288-How-…

As to Airbnb:
It would be helpful to introduce the company by briefly telling us who they are and what do they do, who their competition is, etc. I, for one, have heard the name and seem to remember their recent IPO, but I am clueless as to how they make their money, who their customers are, what their TAM is, etc. Basically I don’t get a feel for the company without a bit of an introduction.

Looking at the 2019 EBITA of $878 and the 2020 EBITA of $1,252, we get a year-over-year increase in earnings of 42.6%. If this is the only financial information available, I would want to wait and see if their growth is accelerating before investing any money. If you have pre-2019 financials, I would definitely look at the earlier figures and see how high the growth was in prior years. There seems to be a tremendous fluctuation in quarterly earnings, $501 vs. $20 the following quarter, which in my mind requires some explanation. If earnings are that unpredictable, it would make me hesitant to even open a position even with more information on the company.

Since you are a new TMF member you may not have seen Saul’s guidelines listed in For Board Newcomers…. Here are examples how to present and format a new growth stock. Have a look:

“““2. How to present a new growth stock in a format that will generate lots of engagement. Tossing out a simple “What do you think about XYZ” onto this board won’t cut it. You have to tell us about the company, what it does, and why you like it. Here are a few examples of SaaS companies and other fast-growing companies currently not the focus of this board:

2.1 Discussion of SaaS-type companies currently the focus of this board:

a. Introductions to a Stock, examples:

• PagerDuty (PD), https://discussion.fool.com/pagerdutypd-a-deep-dive-34191497.asp…, and

• Slack (WORK) IPO, https://discussion.fool.com/slack-ipo-a-first-look-34208321.aspx…

b. Earnings Follow-up Notes, examples:

• Alteryx (AYX), https://discussion.fool.com/alteryx-q120-and-its-new-apa-platfor…, and

• MongoDB (MDB), https://discussion.fool.com/mdb-quick-and-dirty-34223901.aspx?so…

2.2 Fast-growing companies not currently the focus of this board but welcome if presented as follows:

a. Introduction to a New Stock

• Peleton (PTON), https://discussion.fool.com/introduction-to-pton-34527814.aspx?s…

• CarGurus (CARG), https://discussion.fool.com/cargurus-carg-a-2017-ipo-winner-3401…

b. Earnings Follow-up Notes

• DocuSign (DOCU), https://discussion.fool.com/docu-q2-34609983.aspx

• Carvana (CVNA), https://discussion.fool.com/my-ongoing-case-for-cavana-34213744…

For more guidelines, see https://discussion.fool.com/for-board-newcomers-all-others-34765…

Again, welcome and good luck,

I. M. Young
Assistant Board Manager

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