Shares in accommodation and experiences specialist Airbnb (NASDAQ: ABNB) are having a great run at the moment. Over the last three months, the ABNB share price has climbed from around $150 to $200.
I’ve said before that Airbnb appears to have a lot of potential from an investment point of view. However, I’ve never hit the ‘buy’ button and actually picked up stock. Is now the right time? Let’s take a look.
Airbnb: strong Q3 earnings
Airbnb’s most recent results, for the third quarter of 2021, showed the company has a lot of momentum right now.
For the quarter, the group generated record revenue of $2.2bn, up nearly 70% year-on-year, and up 36% on Q3 2019. Meanwhile, net income came in at a record $834m, up 280% year-on-year. Total nights and experiences booked were 79.7m, up 29% year-on-year.
Looking ahead, Airbnb said that it expects Q4 revenues of around $1.4bn-$1.5bn, which would take full-year revenues to around $5.8bn-$5.9bn.
What stands out to me here is that revenues for 2021 are expected to be well above 2019 levels ($4.8bn). That’s very impressive. I say this because the majority of the major hotel chains aren’t expected to generate revenue anywhere near 2019 levels this year.
For example, UK-listed InterContinental Hotels Group, which owns a range of top hotel brands including InterContinental, Holiday Inn and Kimpton, is expected to generate revenue of $1.5bn this year, versus $4.6bn in 2019. It’s a similar story for Hilton and Marriott.
This suggests Airbnb is capturing significant market share from the traditional hotel operators.
ABNB share price targets raised
Since Airbnb posted its Q3 earnings, a number of Wall Street firms have raised their price targets for the stock. One such broker is Susquehanna, which raised its price target to $235 from $200, saying ABNB is a “must-own stock for the recovery given its strong positioning, long-term opportunity, and profitability improvements.”
Another is JP Morgan, which increased its price target to $195 from $170. Its analysts said the company looks set to benefit from shifting consumer preferences, such as a move towards non-urban destinations and alternative accommodation.
Overall, broker sentiment towards Airbnb stock appears to be very positive right now after the company’s Q3 results.
Should I buy Airbnb stock now?
I still have some concerns over the stock’s valuation however. After the recent share price rise, Airbnb now sports a market-cap of a whopping $126 billion. That means that the stock has a forward-looking price-to-sales ratio of about 22. That’s high and it doesn’t leave a huge margin of safety. If the company has a bad quarter, the share price could take a big hit.
There are a few other risks here as well. One is new regulation that could impact hosts. Another is potential lawsuits from unhappy customers.
So should I buy shares now? I’m certainly tempted to initiate a small position here. However, I’m going to hold off for now and wait for a more attractive entry point.
All things considered, I think there are better growth stocks I could buy right now.