Rothschild Redburn moved Airbnb to Neutral from Sell and set a $190.00 price target, saying growth in the core business has picked up. The firm said its cautious stance proved correct over six years but wrong over the past year.
Rothschild Redburn upgraded Airbnb to Neutral from Sell on Monday. It set a price target of $190.00, citing improved growth momentum in the company's core business.
Why the firm changed its view
The firm said its cautious stance on Airbnb proved correct over a six-year period but wrong over the past year. The analyst noted that efforts behind the scenes laid groundwork for acceleration in the core business, which became evident in the third quarter.
For two years, Airbnb grew room nights no faster than Booking or Expedia as it reached maturity within core markets. Increased marketing intensity during that period meant earnings growth lagged peers.
Rothschild Redburn said it failed to notice the underlying momentum earlier this year, when a gap in room night growth opened. It attributed the oversight to one-off factors. Third-quarter room night growth, the firm said, showed the underlying business is accelerating alongside temporary tailwinds.
Valuation and the stock
Rothschild Redburn said the stronger growth outlook better supports Airbnb's premium valuation, undermining its previous negative thesis. Shares were trading at $189.99, near their 52-week high of $193.45, with a 57% return over the past year.
According to InvestingPro analysis cited in the article, the stock appears fairly valued at current levels. The same analysis put gross profit margins at 83%, while revenue grew nearly 17% over the last twelve months.
Other analysts after third-quarter results
Airbnb reported third-quarter results that beat estimates for revenue, gross bookings and EBITDA. Revenue rose 16% to $4.9 billion, and bookings rose 21% to $27.7 billion year over year on a constant currency basis.
Evercore ISI pointed to the 52% EBITDA margin. Cantor Fitzgerald raised its target to $180 and Goldman Sachs to $185, both keeping a Neutral rating. Evercore ISI and Canaccord raised their targets to $230 and $225, respectively. Mizuho set a new target at $245, citing Airbnb's AI expansion plans.
Source: Investing.com
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