$ABNB - Q3 Profits surge 280% yoy seeing highest revenue & net income ever. Is travel and recovery play over or could this only be the beginning of better times ahead?
During our FB Live on June we did a thorough thesis on ABNB with a strong conviction that travel will only rebound bigger than ever and is only a matter of time that they would have explosive earnings in the coming quarters carried by the summer holidays, mass vaccination, longer stay trends and work + travel experiences picking up. Read our thesis here: https://stockbit.com/post/6479718.
We are glad that the thesis played out (so far) and the results have been reflected both into their earnings and the stock price with unrealized gains so far of 40% since the first tranche buy. We are also glad that our members managed to get in early on the action, this is a result of patience and building strong convictions by investing with a proper thesis intact. The tricky thing however is their valuations as some might treat them to be lofty but it is hard to place a price tag on a market leader, asset light company that can capture a monster TAM especially with strong tailwinds ahead considering current market factors. Thus far we have been building our positions by averaging up as we deem that this is a long term play and with all the recent updates in mind, this may only be the beginning of better earnings ahead!
Here are some key factors on why we remain to be more bullish than ever in this stock:
1) More companies adopting 'work from anywhere' concept - people can travel and mix work with leisure as bigger companies are willing to accept this trend
2) Bigger opportunities from longer term stays. As mentioned in the initial thesis - precovid longer term stays already have been high. But now with covid this trend and acceleration has been off the roof comprising 20% of their revenues!
Only going to get better which improves their profits and incur lesser CAC
3) Cross Border openings - More and more countries other than US are opening up for travel which provides massive tailwinds for earnings and more pent up demand.
4) https://bbc.in/3bMf8wn
This news is huge and going to provide a huge catalyst moving fwd 2022 and beyond as covid becomes a 'norm' trend. More travel, more longer stays and newer form of work + leisure is only going to increase.
5) Their business and hosting ways are adaptable especially ready if a new covid strain comes. Brian Chesky mentioned that they are ready for delta or new strains and will adapt as their hosting and price points vary for different circumstances. With their improving AI and ML backed systems to drive decisions they can easily set lower price ranges and stringent restrictions on visiting if this was to happen. But again with 4) happening I just dont think that'll be the case anymore. Covid is going away slowly
6) Management is very aggressive and relentlessly working with govt DMOs (Destination Marketing Organizations) to revitalize urban travel and bringing more income (tax) to the cities as a win win situation.
Also Chesky himself highlighted that he expects to be more aggressive and not let people get the vibe of ‘oh my best days are behind me from my 20s’. Hes only going to make shit better hereonin! Personally have been very pleased with him and the team. They consider themselves as just a small startup but have been constantly innovating and improving more upgrades to cater to the demand!
7) Their core driven focus gets stronger: Onboard hosts faster, Making processes seamless and Increase user & host experiences
8) Holidays, coming thanksgiving and increasing travel are huge catalysts ahead to reflect better earnings next year and Chesky hinted that they are ready with new 50+ upgrades and products to cater this! They expect 2022 to have new innovation as they aim to encourage people to live anywhere increasing the nomad trend.
Other takeaways from their recent quarter: "The Global Hotel and Travel Accommodation market is expected to double from its current market size of $673.02 to reach a total size of $1052.8 billion by 2025. North America is expected to be the second largest region accounting for 27% of that market."
"Airbnb, has presently captured less than 1% of its total addressable market globally. A strong rebound in international travel and Airbnb’s resilient business model and growth opportunities means the firm will continue to capture global market share and grow at a significant rate in the years to come."
Personally we are more bullish than ever and will continue to build out our position as we go along. Hope you have built your convictions on this monster TAM company and went in with us on the action since!