Airbnb Outperforms in 2020, Positioned Well for 2021

We retain our view that Airbnb ABNB is positioned to extend its leading alternative accommodations network (source of its narrow moat) and grow into one of the industry’s leading experiences platforms. Our constructive stance is captured in our forecast for nearly 30% average revenue growth during 2021-25, with EBITDA margins reaching over 20% in 2025. We may increase our $68 fair value estimate modestly to account for stronger marketing leverage, but with shares trading over 90 times 2023 EV/EBTIDA, we see shares as rich.

Fourth-quarter sales declined 22%, in line with our estimate. This marked a pullback from the 18% decline Airbnb experienced in its third quarter, following a larger step up from the 72% drop in the second quarter, as a result of travel restrictions tied to the resurgence in COVID-19 cases. But Airbnb outperformed the 50% plus revenue per available room, or revPAR, declines of many hotel chains exposed more to urban locations and air international travel, as travelers sought out its alternative accommodations, which are providing social distancing and longer stay advantages. For 2020, Airbnb revenue declined 30%, in line with our estimate, with negative EBITDA of $251 million, below a $136 million shortfall estimate. As vaccines continue to be distributed, we expect travel demand to rebound strongly in the second half of 2021, with Airbnb’s full-year 2021 revPAR returning close to 2019 levels. This is supported by nights booked in North America nearing 2019 levels (prior to cancellations and alterations).

Airbnb noted that its traffic nearly fully recovered without the benefit of performance marketing out of the nadir of the pandemic. This indicates Airbnb’s brand awareness is strong and increases our confidence that it can reduce its marketing as a percent of sales to the low-20% sooner than our existing 2026 expectation. Support of this is in Airbnb spending 17% of sales on marketing in the fourth quarter (excluding stock-based compensation).

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