Airbnb stock has both dazzled and intrigued investors in growth stocks since its Nasdaq debut in December 2020. From its initial public offering price of $68 per share, ABNB stock soared as much as 223%, hitting an all-time high of 219.94 on Feb. 11, 2021.
In 2021, the travel industry faced the challenge posed by multiple strains of Covid-19, including the delta and omicron variants. And the start of 2022 has not made travel much easier. Staffing shortages at airlines and the extremely high infection rate of omicron discouraged some travel. Yet in many countries, quarantine requirements are loosening. Fewer tests are being required.
The dispute between the U.S. and Western Europe and Russia over Ukraine is a factor to watch in terms of the potential impact on travel in that specific region. More business travelers, meanwhile, say they are feeling more comfortable about flying again.
Overall, that’s good news Airbnb (ABNB), whose shares have begun a new rebound in recent weeks.
And shares at one point rose more than 15% for the week on Wednesday following a heavily anticipated and positive fourth-quarter report. One highlight? Airbnb posted a net profit of 8 cents a share vs. a new loss of 58 cents during the coronavirus-plagued quarter in 2020. The positive earnings also crushed Wall Street’s view for 4 cents. Revenue ripped 78% higher to $1.53 billion, accelerating from a 67% jump in the third quarter of 2021.
Full-year revenue grew 77% to a record $5.99 billion.
On Wednesday, CFRA announced it’s keeping a $215 price target. The investment bank also boosted its fiscal 2022 earnings estimate to $1.33 a share from 76 cents and the 2023 forecast to $2.21 from $1.16. The Street’s current consensus forecast: $1.37 a share for 2022 vs. a net loss of 57 cents last year, and $2.03 for 2023.
Clearly, ABNB is now in base-building mode.
ABNB stock, a megacap play, rallied 9.5% in the third quarter. Following encouraging third-quarter results, Airbnb scared the bears away on Nov. 5. Shares vaulted nearly 13% that session in humongous turnover. But the fourth quarter of 2021 gave investors a roller coaster of a ride. ABNB started the quarter at 167.75 and ended the year at 166.49, down less than 1%.
Airbnb has bullishly crossed back above a key technical level, the 50-day moving average. It also jumped back above the longer-term 200-day moving average, which is rising slightly. These chart-analysis tools trace, on a daily chart, a stock’s price trend over the past 50 and 200 trading sessions, respectively.
The new rebound off a late-January low of 134 has pushed the stock’s market value back above $110 billion.
So, is Airbnb stock a buy now? Or is it time lock in profits and sell?
This story analyzes all facets of the innovator in leisure travel 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.
Strong And Stunning Q4 Results
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.
The company chalked up 73.4 million total nights and experienced booked in the fourth quarter of 2021, jumping 59% vs. a year ago. And gross booking value of $11.3 billion jumped 91%, up 93% excluding currency exchange effects. Airbnb posted net income of $55 million, translating into after-tax margin of 3.6%. Free cash flow hit $376 million.
Airbnb ended the year with $8.3 billion of cash, cash equivalents and marketable securities.
“We have millions of Airbnb hosts who offer nearly every type of home in nearly every community around the world,” the company wrote in a Q4 news release. Executives also noted that guests are “discovering thousands of small towns and rural communities on Airbnb” while also returning to cities. Gross nights booked at urban locales accelerated vs. Q3 and “have nearly recovered to Q4 2019 levels.”
Total diluted shares outstanding 681 million shares at the end of the fourth quarter. MarketSmith data currently shows ABNB with 635 million shares outstanding.
Are Institutions Accumulating Airbnb Stock?
To better understand how fund managers are loading up on shares, check out the action on Aug. 24. That day, shares ramped up 10% to a three-month high in blistering volume — a sign that institutional investors loaded up on shares. Almost 21 million shares exchanged hands, more than triple its average turnover over the past 50 sessions.
Indeed, a pivotal trading day.
Plus, the former IBD Leaderboard member had already gained ground four weeks in a row before the company posted second-quarter results on Aug. 12. This marked the longest win streak since a six-week advance through the week ended Feb. 12.
Shares currently trade 18% below the all-time high of 219.94. And a first-stage base keeps forming — good for bullish investors.
ABNB Stock Analysis: Is Relative Strength On The Mend?
Airbnb has seen its Relative Strength Rating rocket to a respectable 79 on a scale of 1 to 99. That rating is still down from 90 a few months ago. The RS rating means ABNB outperforms now 79% of all companies in the IBD database over a 12-month time frame. Yet the three-month RS Rating has shot to a 90. That’s solid.
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 Rating means a stock is already ranking in the top 15% in terms of stock price strength. When it comes to picking high-flying growth stocks, those with superior price strength tend to make new highs, then keep going higher.
Keep an eye on the Accumulation/Distribution Rating. Right now, Airbnb gets a neutral C grade on a scale of A to E. This proprietary IBD rating 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.
Airbnb Fundamentals Today
For now, Airbnb’s 72 Earnings Per Share Rating has improved notably. This figure means its profit record in the near and long term is superior to 72% of all publicly traded companies. 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 D grade, but that’s still dismal on a scale of A to E.
The I In CAN SLIM: Institutional Ownership
Fortunately, mutual funds are accumulating ABNB stock.
MarketSmith data shows the total number of mutual funds owning a piece of Airbnb has now hit a new record of 1,246 funds at the end of the fourth quarter, up from 664 in Q4 2020. Top funds holding a stake include Janus Henderson Enterprise Fund (JANEX), Franklin Growth (FKGRX), MFS Growth (MFEGX) and the A+ rated Artisan Developing World Investors (ARTYX). ABNB makes up more than 5% of Artisan’s fund assets.
Fidelity Contrafund (FCNTX), JPMorgan Large Cap Growth (SEEGX), MFS Growth (MFEGX) and Wells Fargo Growth (SGRAX), members of the IBD Mutual Fund Index, also now have positions in the stock.
Management owns 1% of Airbnb stock. The float, now at 340 million shares according to MarketSmith, has risen sharply. The float makes up 54% of the 635 million shares outstanding. So, individual investors should prepare for secondary offerings of closely held shares that could hit the stock in the future.
Past Buy Points In Airbnb Stock
The handle represents a final shakeout of uncommitted holders ahead of a potential new breakout on Aug. 24 and a timely new buy opportunity. It formed as the stock tested buying support at the 21-day exponential moving average and the 50-day line.
ABNB offered a buy opportunity for those who are willing to accept higher-than-normal risk. Why? Plenty of investors who bought at much higher price levels and held on to their losing positions may come out of the woodwork, eager to sell their shares to cut losses or get out and break even.
Anxious, disgruntled holders who had bought at 160, 170, 180 or higher create a potential overhead supply of heavy selling.
The 5% buy zone from 152.86 went up to 160.50. So, during a late-September pullback to 159.45, ABNB shares briefly came back into the proper buy area. It’s smart to avoid buying shares far above the 5% zone. After a hot run, a stock can temporarily pull back and shake out new investors who follow the rule of cutting losses short.
Why A Handle On A Pattern Works For Growth Investors
From September to October, a new handle on the large, deep cup pattern also formed. This offered a new entry point at 177.06. And this relatively quiet pullback clears the decks for a potential first-class breakout.
On Nov. 4, right ahead of Q3 results, ABNB shares stretched past this aggressive entry. Then on Nov. 5, the stock staged a bullish breakaway gap.
This means the right time to buy shares was near 194, when ABNB rallied sharply in that session’s first five minutes of trading, then kept going past the high of the first 5-minute intraday trading bar. Please read more about the technique of buying a breakaway gap in this Investor’s Corner. Buying breakaway gaps work best in a strong bull market, especially coming out of a deep or long correction.
But amid new Covid-19 worries, the stock dove sharply below both of these new buy points. The negative reversal forced new buyers to sell shares to keep losses small.
ABNB Chart Analysis Today
A base that develops between 140 and 212 may show a more controlled decline vs. the deep plunge shareholders suffered through in the first nine months of 2021.
For now, the three-month deep cup pattern holds a 212.68 entry point, 10 cents above the left cup’s peak. Again, watch for a handle to possibly form.
Finally, 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.
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