Airbnb’s share price has more than doubled from its issue price of $ 68 per share in just one month since it was listed on the stock exchanges. Now trading at $ 160.8 per share, the vacation rental market may have no room for improvement, according to brokerage and research firm Credit Suisse. Initiating coverage of the new NASDAQ listed component, Credit Suisse rated the script as “Neutral” with a target price of $ 156, while cautioning against volatility. Airbnb has already crossed the price target, gaining 10% in the last 5 trading sessions.
Credit Suisse considers Airbnb to be a beneficiary of the substitution effect taking place outside of hotels. “Over the past decade, other accommodation as a share of total accommodation has grown from ~ 6% to ~ 11% in dollars. In our opinion, this represents a continuous shift in consumer preference, moving from traditional accommodation to alternative accommodation, ”the report states. This trend is expected to accelerate in the post-pandemic world. In addition, the company’s pricing model, which is different from other companies of this type, is also seen as a positive.
Speed up monetization
Going forward, in terms of pricing, Credit Suisse says it expects Airbnb to increase monetization in two directions. These include – 1) Airbnb, as the official merchant in the transaction, currently bears the payment processing fees, which it can pass on to hosts, and 2) the ability to launch an advertising / promotional tool for them. hosts, similar to Amazon, eBay and other marketplaces.
Airbnb management estimates a serviceable addressable market (SAM) at nearly $ 1.5 trillion in the short term and a total addressable market (TAM) in the long term of $ 3.4 trillion. “These figures relate to the company operating in the current short-stay market, in addition to expanding further into long-term experiences and stays,” said Credit Suisse.
Pandemic not so bad
Additionally, the report adds that growth has been accelerated by the pandemic. “One of the key points of our investment thesis is that Airbnb’s use case has proven to be more resilient than other existing travel options, as consumers seek to keep their families in their own protected bubble. and eliminate the potential for interactions with others in elevators, lobbies and other resort activities, ”he says. After hitting a low in April, domestic (US) and international travel grew.
While the target price has been set at $ 156 per share by Credit Suisses, in a Blue Sky scenario, it expects the share to reach $ 200. “For the Blue Sky scenario, we use an EV / Bookings multiple of 2.95x, in the high-end of Airbnb’s high-growth comparables to arrive at $ 200 per share,” the report says. In contrast, in a Gray Sky scenario, Credit Suisse has a target of $ 104.