Airbnb stock jumps 136% in one month since Wall Street IPO; is there room for more upside?

Airbnb’s share price has more than doubled from its issue price of $68 per share in just a month since its listing on the bourses. Now trading at $160.8 per share, the vacation rental marketplace might have no room left for improvement now, according to brokerage and research firm Credit Suisse. Initiating the coverage of the newly listed NASDAQ constituent, Credit Suisse gave ‘Neutral’ rating to the scrip with a target price of $156, while cautioning of volatility. Airbnb has already crossed the target price, gaining 10% in the last 5 trading sessions.

Substitute to hotels

Credit Suisse sees Airbnb as a beneficiary of the ongoing substitution effect away from hotels. “Over the past decade, alternative accommodations as a share of total lodging have increased from ~6% to ~11% dollar share. This represents in our view an ongoing shift in consumer preference away from traditional to alternative lodging,” the report said. This trend is expected to accelerate in the post-pandemic world. Further, the pricing model of the firm, different from other such firms, is also seen as a positive.

Accelerating monetisation

Going forward, in terms of pricing, Credit Suisse says that it expects Airbnb to increase monetisation in two directions. These include — 1) Airbnb as the merchant of record in the transaction currently bears the payment processing charges, which it can pass on to hosts, and 2) optionality to launch an advertising/promotional tool for hosts, similar to Amazon, eBay, and other marketplaces. 

Airbnb’s management estimates a nearly $1.5 trillion near-term Serviceable Addressable Market (SAM) and a $3.4 trillion long-term Total Addressable Market (TAM). “These figures contemplate the company operating within the current core short-term stays market in addition to further expanding into experiences and long term stays,” Credit Suisse said. 

Pandemic not that bad

Further, the report added that growth has been accelerated by the pandemic. “One of the key points from our investment thesis is that Airbnb’s use case proved more resilient than other existing travel options, as consumers sought to keep their families in their own protected bubble and eliminate the potential for interactions with others in elevators, lobbies, and other resort activities,” it said. After bottoming out in April, domestic (US) as well as international travels have seen growth. 

Target price

While the target price has been set at $156 per share by Credit Suisses, in a Blue Sky Scenario it expects the stock to surge to $200. “For the Blue Sky scenario, we use 2.95x EV/Bookings multiple, at the high end of Airbnb’s high-growth comparables to arrive at $200 per share,” the report said. On the other hand, in a Grey Sky Scenario, Credit Suisse has a target of $104.