Airbnb stock has dazzled investors since its Nasdaq debut in December last year. From its initial public offering price of $68 per share, ABNB stock has soared as much as 223%, hitting an all-time high of 219.94 on Feb. 11.
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And this past Monday, the company unveiled more than 100 upgrades “to refine and improve every aspect of the Airbnb service, from our website and app to our community support and policies,” Airbnb noted in a news release. Investors evidently liked the news. On Thursday, shares surged 6.3% in triple its average volume over the past 50 sessions.
That helped ABNB stock looks end a seven-week slump and lodge a 4% gain for the week.
Yet overall, the action in recent months has been more, shall we say, staid.
In late April, Airbnb (ABNB) marked five straight gains. And at one point, the travel play bullishly retook its 21-day exponential moving average. But that rebound dissipated fast. The stock is trying to recover from seven down weeks in a row and bottom out after posting Q1 results on May 14.
San Francisco-based Airbnb reported revenue of $887 million, up 5% vs. a year ago and pounding the FactSet consensus view. The company also noted a 13% year-over-year rise in “nights and experiences booked” to 64.4 million. It recorded a net loss of $1.17 billion (-$1.95 a share) vs. a net loss of $341 million in Q1 of 2020 (-$1.30 per share).
The Street had expected the company to lose $1.19 a share and post $714 million in sales, down 15% vs. a year earlier.
Trading near 140, ABNB trades only 15% above its all-time post-IPO low of 121.50.
Essentially, Airbnb stock has locked current shareholders into a widening trading range between 130 and 220.
Weak action has replaced the uptrend, albeit a brief one, that began with a breakout past a 175.07 proper buy point in a narrow, closet-width IPO base. Some investors may feel some frustration over how ABNB stock has made a full round trip of its gains.
When a stock gives up a double-digit percentage gain from the buy point, it triggers a defensive sell signal.
At the same time, despite hitting its worst close since early January, Airbnb still holds a very impressive gain of more than 108% from its IPO price.
So, is it a buy now?
This story will analyze all facets of the innovator in leisure travel in terms of fundamentals, technicals and mutual fund ownership. All of these elements get inputted into IBD’s CAN SLIM methodology, a research-proven seven-point paradigm for successful growth stock investing.
Airbnb Stock: Is It A Buy Right Now?
This may confuse some investors: How can a stock like Airbnb show a weakening Relative Strength Rating of 8 (on a scale of 1 to 99) when the stock has already gone up a lot from its initial offering price?
One reason: ABNB has traded just five months in the public market, and the RS Rating covers 12-month relative price performance. In general, you 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 and 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.
Also, the RS Rating places emphasis on the past three months of action. Since the start of Q2, ABNB stock in fact has fallen sharply. So that underwhelming performance also hurts its relative strength score.
Keep an eye on the Accumulation/Distribution Rating, too. Right now, Airbnb gets an unsettling D+ grade on a scale of A to E. This proprietary IBD rating measures the amount of heavy institutional buying vs. selling. A grade of C+ or higher denotes net institutional buying over the past 13 weeks; 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.
ABNB Stock Fundamentals Today
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. So, competition is truly fierce. Plus, coronavirus walloped the lodging industry in 2020. No wonder Airbnb’s revenue declined in three of its four quarters last year.
After a nominal pickup in the top line in the first quarter of 2020, Airbnb saw revenues fall 72%, 18% and 22% vs. year-ago levels in Q2, Q3 and Q4, respectively.
Over that same time frame, Airbnb lost a total $1.74 a share. The company has 608 million shares outstanding.
Will business improve in 2021?
Right now, Wall Street thinks Airbnb will keep bleeding red ink, losing another $1.59 a share in 2021. However, the bottom-line consensus estimate for 2022 has turned from a net loss of 26 cents to earnings of 7 cents a share, an encouraging sign.
Analysts polled by FactSet also see revenue rebounding 268% in the second quarter of this year to $1.23 billion vs. year-ago levels, then gain another 42% to $1.91 billion in Q3.
So, any fresh positive guidance on both the top and bottom lines could spark renewed buying in Airbnb stock.
For now, Airbnb’s 10 Earnings Per Share Rating means its profit record in the near and long term is superior to only 11% 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, sits at the lowest possible E grade.
The I In CAN SLIM: Institutional Ownership
Fortunately, mutual funds are increasingly accumulating ABNB stock.
MarketSmith data shows the total number of mutual funds owning a piece of Airbnb rose to 730 funds at the end of the first quarter vs. 656 in Q4 2020. Top funds holding a stake include Janus Henderson Enterprise Fund (JANEX), Franklin Growth (FKGRX), MFS Growth (MFEGX) and Barron Asset Retail (BARAX).
Management owns 2% of the entire company. The float, at 189 million shares, is rising. Yet, this float poses just a fraction of the 608.4 million shares outstanding. So, individual investors should prepare for secondary offerings of closely held shares that could hit the stock in the future.
Airbnb Stock In A Nutshell
While the stock is now forming a new base, a bullish chart pattern has yet to emerge. Plus, the stock still trades well beneath its 50-day moving average and nearly 36% off its all-time peak of 219.94.
This means the stock is not in the right position to stage an outstanding breakout.
So, ABNB stock is not a buy right now. But watch for a great base to fully form. Patience could pay off in spades.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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