Airbnb stock has intrigued investors searching for the best growth stocks since its December 2020 market debut. From an initial public offering price of $68 per share, ABNB soared 223%. The Nasdaq-listed large cap hit an all-time high of 219.94 on Feb. 11, 2021.
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The performance since then? Disappointing.
But strong gains so far this year — and growing signs the innovator in travel accommodations is working on a new base — suggest the tide is turning.
In mid-February, ABNB shares cruised to nine-month highs. They jetted 13% higher in heavy volume the day after the company released fourth-quarter results on Feb. 14.
At one point in February, ABNB stock rose to 144 and came close to wiping out half of the 138-point decline from its 219.94 peak.
So, is Airbnb stock a buy now? Or is it time to cut losses and sell?
This story analyzes all facets of the company in terms of fundamentals, technicals and mutual fund ownership. All of these elements get inputted into CAN SLIM, IBD’s research-driven seven-point paradigm for successful growth stock investing.
Airbnb Stock Today
Is Airbnb stock now making a normal-looking pullback? Compared with its past declines, definitely so.
In early April, Airbnb sliced through the 10-week moving average. But ABNB rallied off its now-rising 40-week line, which moves in similar form to the 200-day moving average on a daily chart.
As the chart shows, Airbnb stock now looks poised to rally back above the 10-week line. Good stocks not only rise above this moving average; they lead them higher.
Airbnb is slated to announce Q1 results on Tuesday after the market close.
According to Yahoo Finance, analysts on consensus see earnings of 7 cents a share vs. a net loss of 3 cents a year earlier and a 6% rise in revenue to $1.6 billion. Among 21 analysts polled, the forecasts range from a net loss of 2 cents to a profit of 19 cents.
Airbnb’s first quarter is typically its weakest fundamentally. The Street expects profits of 73 cents in Q2, up 30% vs. a year ago, and a 3% pickup in sales to $2.16 billion.
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Airbnb Q4 Results
In the fourth quarter of 2022, the company’s earnings soared 500% vs. a year earlier to 48 cents a share. That walloped Wall Street expectations for a profit of 25 cents. Revenue jumped 24% to $1.90 billion, also beating the consensus estimate.
The Q4 results extended a streak of stout earning increases for the travel firm; Airbnb has posted a profit in five of the past six quarters. The top line grew 67%, 78%, 70%, 58%, 29% and 24% vs. year-ago levels over the same time frame. So while sales growth has decelerated in recent quarters, they’ve held at a fast clip.
“During the height of the pandemic, we made many difficult choices to reduce our spending, making us a leaner and more focused company, and we’ve kept this discipline ever since,” management commented in the shareholder letter. “We ended 2022 with 6,811 employees, and currently expect to continue hiring at a judicious pace in 2023. Compared to 2019, our headcount is down 5% while our revenue is up 75%.”
Full-year revenue jumped 40% to $8.4 billion. Net income hit $1.9 billion for the year, the company’s first full year of profit on a GAAP basis.
Meanwhile, management projected first-quarter sales of $1.75 billion-$1.82 billion, up 18% to 23% vs. a year earlier, excluding currency impacts. The company also sees adjusted EBITDA margin to fall slightly year over “due to changes in the timing of our brand marketing spend.”
Recently, the Street has boosted its full-year profit forecast for Airbnb to $4.33 a share, up 55%, and up another 16% to $5.03 in 2024. Quite a change from 2020, when Airbnb lost $7.62 a share, and 2021 (a 57-cent loss).
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Travel Sector Rebounding
The San Francisco-based firm’s disruptive business model: Allow house and condo owners turn their properties into short-term rentals. The idea has hatched plenty of competitors. Even large hotel chains offer similar properties in addition to their standard lodging accommodations.
In 2021, the travel industry faced the challenge posed by multiple strains of Covid-19, including the delta and omicron variants. But 2022 weaved a different yarn. Known cases of Covid-19 fell sharply in most continents. Countries that depend on the tourism economy have ended quarantine and testing requirements for incoming travelers who show proof of full vaccination.
Airbnb’s stock rebound in 2023 has come amid heavy negativity on Wall Street.
In mid-December, Morgan Stanley downgraded Airbnb to underweight from equal weight and cut the price target to 80 from 110. Also, the weakened housing market has made a negative impact on the short-term rental market, according to this Wall Street Journal piece.
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Airbnb Stock Analysis: Is Relative Strength On The Mend?
Airbnb’s Relative Strength Rating recently hit 91 on a scale of 1 to 99, but has cooled to an 87. The means ABNB outperforms 87% of all companies in the IBD database over a 12-month time frame.
You generally want to home in on companies that show an RS Rating of 85 or higher. Why? That way you’re selecting stocks already showing strength ahead of a potential breakout to new highs and a profitable price run. An 85 RS Rating also means a stock is already ranking in the top 15% in terms of stock price strength.
On the positive side, MarketSmith data shows Airbnb stock’s 6-month RS Rating at a 90 on a scale of 1 to 99.
Keep an eye on the Accumulation/Distribution Rating. Airbnb gets a positive grade of B+ on a scale of A to E. The proprietary Accumulation/Distribution grade measures the amount of heavy institutional buying vs. selling over the past three months. A grade of C+ or higher denotes net institutional buying over the past 13 weeks; a C- or lower points to net selling.
If you want a stock that is eagerly getting scooped by mutual funds, banks, college endowments and the like, prefer those with an A or B grade before you buy.
The 80 Earnings Per Share Rating rose from 74 after Q4 results. In most cases, you’d prefer companies with an EPS score of 80 or higher. The SMR Rating, analyzing sales, profit margins and return on equity, moved up to a superior A grade on a scale of A to E.
All in all, these individual ratings help explain why ABNB receives a top-notch Composite Rating of 99 on a scale of 1 to 99, according to IBD Stock Checkup. Typically, the best growth stocks wield a Composite score of 90 or higher at the beginning of their sharp price runs.
The I In CAN SLIM: Institutional Ownership
MarketSmith data shows the total number of mutual funds owning a piece of Airbnb keeps rising. It hit a record 1,827 funds as of the end of the first quarter this year, way up from 658 in Q4 2020. Overall, funds own 41% of the 641 million shares outstanding.
Fidelity Contrafund (FCNTX), JPMorgan Large Cap Growth (OLGAX), Franklin Growth (FKGRX) and Wells Fargo Growth (SGRAX), Harbor Disruptive Innovation (HNMGX) and Allspring Growth (SGRAX) — all members of the IBD Mutual Fund Index — hold positions.
At the end of Q1, Contrafund grew its stake to 3.38 million shares vs. 3.12 million in September, according to MarketSmith. JPMorgan Large Cap jacked its holdings to 2.66 million shares from 800,000 shares in Q4 last year.
Management owns 2% of Airbnb stock. The float, now at 396.7 million shares according to MarketSmith, has risen but still makes up just 62% of the 640.5 million shares outstanding. So, individual investors should prepare for secondary offerings of closely held shares that could hit the stock in the future.
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Airbnb Stock Chart Analysis Today
In early February this year, ABNB completed a new cup base and formed a handle on the cup. This produced a valid entry point at 121.50, 10 cents above the handle’s highest price.
Given the gap-up at the market open on Feb. 15, an investor couldn’t purchase shares near the 121.50 handle buy point. So, was there an alternate buy point amid this surprise rally? Yes.
Based on IBD research, powerful breakaway gaps following positive news suggest that the rally can only get stronger. Thus, looking at the early trading in Airbnb stock via an intraday chart, the first 5 minutes of trading showed ABNB hitting a high of 135. Once it surpasses this first 5-minute bar’s high, the stock can be bought.
It’s important to buy as close to the alternate entry as possible — in this case, no more than 5% above the 135 buy point.
For more on the breakaway gap, please check out this Investor’s Corner piece.
Not All Breakouts Work Out
Amid a general decline in the major indexes, the alternate buy point did not turn out favorably. Indeed, alternate entries do not guarantee success, especially when market conditions get choppy. So, keep a close eye on changes in the IBD outlook on stocks. Remember, breakouts have the best chance of working when the outlook notes a confirmed uptrend.
At this point, the principal buy point of 121.50 is no longer valid since ABNB is undergoing a significant decline. The correction so far, however, is less than 26% from the recent high of 144.63. Why is this bullish? This latest correction has so far proven milder than in past declines. But shares need to bottom out, form the right side of a new base, and set up a new breakout.
Thus, Airbnb stock is not a buy now.
Overall action in 2023 remains positive. It notched several sharp weekly advances in heavy, above-average turnover. For instance, ABNB stock rallied 13% in higher turnover during the week ended Jan. 13. More weekly gains ensued in heavy or accelerating turnover.
Such price-volume action hinted at unabashed accumulation of shares by mutual funds, banks, hedge funds, large investment advisors, pension plans, college endowment funds and the like. To learn how to quickly spot such institutional demand, read more about the I in CAN SLIM at IBD University.
An Early Entry Point?
One could draw a trendline that connects the 130.85 peak in the week ended March 10 with recent peaks near 126 and 120. A strong rise past 120 would trigger an early entry point. The stock did just that on Monday, gapping up at the open and rallying 4.8% to 125.65 in the heaviest volume in four weeks.
However, buying a stock right before quarterly results entails extra risk.
At some point, Airbnb may stage a strong breakout to 52-week highs. When that happens, always stay disciplined with position management; cut losses short if the stock breaks expectations. William O’Neil, founder of Investor’s Business Daily, discovered during decades of research that the biggest stock market winners rarely fall more than 7% to 8% below a proper buy point.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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