Should you buy Airbnb stock (Feb 2023)

3 months ago
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Should you buy Airbnb stock? Airbnb produced a strong earnings report yesterday and the stock jumped over 10%. That takes the market cap of the company to $84 billion. With 9.6 billion of cash and 2 billion in debt the enterprise value is just over 76 billion.

Highlights from the report was a 40% increase in revenue to 8.4 billion, a net income of 1.9 billion, which represents a net margin of 23% and the company's first full year of GAAP profits.

But Airbnb retains one key advantage which is that its properties are being used not just for vacation purposes but for working trips and longer stays.

The company is also being managed effectively and continues to improve the product. Moreover, the shareholder letter hinted at some ‘big ideas’ that could potentially expand the company’s core product.

Let’s assume Airbnb can grow net income 20% per year for the next 10 years. That would bring net income to around 12 billion. A 25 times multiple on that figure would give the company a valuation of 300 billion which works out to an investment return of 14.7% per year.

So as you can see, investors are already pricing in significant future growth. But it's hard to bet against another set of record results which is why I continue to give the stock a bullish rating.

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