Thomas Barwick
Airbnb (NASDAQ: ABNB) has the potential to further develop niche markets in the online travel sector.By focusing on unique experiences and leveraging its balance sheet to invest in AI-assisted travel bookings, I believe it can take advantage Compared to peers Booking Holdings and Expedia over the long term.
Airbnb’s differentiators
Based on my knowledge of the industry, Airbnb’s two main competitors are Booking Holdings (BKNG) and Expedia (EXPE). Both companies are older than Airbnb in some ways, with both IPOs in 1999 and Airbnb going public in 2020. While Booking Holdings appears to be the greatest of the three companies based on analysis of operational scope and financial considerations, Airbnb offers a unique product offering a unique accommodation experience that is more experience-focused than both of its competitors.
In many ways, Airbnb appeals to millennials and those looking for a new life. Booking Holdings and Expedia offer a more traditional mix of options that are better suited for business travel than Airbnb.
I must admit that based on my use of the platforms provided by these companies and my research on these companies, I find the distinction between them to be weak, with Airbnb considered to have a wide moat in its operations. Instead, it is more realistic to think that Airbnb’s differentiating qualities are relatively superficial. That doesn’t mean it’s not important; I believe so. But we should take into account that, in my opinion, the main difference when using Airbnb versus Booking.com is the quality of the platform interface. I believe Airbnb wins here, but as far as lodging products go, the differences are subtle right now.
Where I think Airbnb can stand out is by continuing to hone its specific niche of unique accommodations. In other words, it can more effectively capture the market with quality accommodation that can’t be found elsewhere.
Peer analysis, including financials
In light of the above comments, consider the following financial table comparing three peers:
| Airbnb | Booking Holdings | Expedia.com | |
| Market value | $101.14B | $120.35B | $17.81B |
| 5-year average revenue growth rate (“YoY”) | 29.92% | 17.01% | 11.87% |
| EPS GAAP Growth (“FWD”) | 21.09% | 37.55% | 75.98% |
| equity asset ratio | 0.4 | -0.11 | 0.07 |
We can see from this table that Expedia’s expectations for future earnings growth are particularly strong. I’m a very long-term investor, and while SA’s quantitative system ranks Expedia as a sole “buy” at the time of writing, this seems too short-sighted for my investing style. I understand the weighting of corrections and momentum, but my view is to hold for the long term. I want to buy some businesses that I think have exceptional long-term operating value, hoping to keep them in my portfolio forever. I don’t have much interest in price trading because I want to be permanently involved in the great progress of great businesses.
My point is that while Expedia’s short-term returns should be very favorable, as widely expected, Booking Holdings and Airbnb likely have more solid long-term prospects. In my opinion, my basic assumption is that Booking Holdings and Airbnb appear to have higher quality products. Expedia may offer more room to grow due to its smaller market cap, but I’m not convinced as I believe Airbnb and Booking Holdings will be able to iterate at a more aggressive pace with the additional financing their larger scale brings . The market value of introducing more sophisticated artificial intelligence into its software experience. I believe that AI-assisted travel planning will become an integral part of the long-term user experience for software companies involved in accommodation provision.
Readers who are familiar with me know that I take a stable balance sheet very seriously. I believe this is not only a good protection mechanism against negative events that impact business performance, but also provides more room for iteration and agility to adapt to consumer trends. It’s obviously important for investors to understand that better balance sheets are valuable at this time as artificial intelligence capabilities continue to emerge. Airbnb may have an advantage in funding its AI operations, which is important as consumers increasingly rely on the ease of automated travel planning. I think this is another area that Airbnb can capitalize on well, and the fact that it’s popular with a younger audience is an even bigger advantage because the younger generation is more tech-focused, which gives Airbnb room to further hone in on artificial intelligence Supported accommodation is provided.
Valuation considerations
Here’s my full peer analysis of valuations, including discounted earnings, and the reason I chose discounted earnings rather than cash flow is because we’re looking at the technology sector, which has earnings over time that are consistent with the sector. Common investor sentiment premium correlations.
| Airbnb | Booking Holdings | Expedia.com | |
| GAAP Price to Earnings Ratio (“FWD”) | 36.72 | 20.81 | 14.1 |
| 3-year EPS CAGR consensus estimate (December 2024-December 2027) | 16.06% | 13.39% | 19.78% |
| My 10-year growth stage EPS CAGR forecast | 17.5% | 15% | 15% |
| My end-of-10 EPS CAGR forecast (consistent with typical U.S. annual inflation) | 4% | 4% | 4% |
| My discount rate (my low-end annual expected total portfolio return) | 10% | 10% | 10% |
| My fair value estimate | $191.3 | $3,340.62 USD | $194.4 |
| Current stock price | $161.94 | $3,609.33 | $131.75 |
| Indicates margin of safety | 15.35% | -8.04% | 32.23% |
From my presentation here, I conclude that Airbnb presents a very attractive investment opportunity at the time of writing. Additionally, Expedia is a very good value right now, but my long-term prospects for the company are less favorable than Airbnb’s, where I expect higher growth. So, of the three, my favorite investment, and one that I’m considering adding to my portfolio, is Airbnb.
Risks to consider
While I’m clearly optimistic about Airbnb’s prospects, there are significant risks to the company, including rising new threats to cybersecurity as it relates to the use of quantum computing to enhance criminal capabilities. While this risk may seem subtle, it will add significant upcoming costs for Airbnb and all the companies in my peer analysis to rigorously protect customer and business data. Failure to do so harms not only customers but also the reputation of the platform that was successfully compromised.
Additionally, we must remember that these businesses are vulnerable to changes in the economic climate that can negatively impact travel. While the COVID-19 pandemic appears to be behind us, climate issues are likely to become more prevalent as time goes on, an issue that is becoming increasingly concerning. Therefore, if travel is disrupted due to a natural disaster, Airbnb will be significantly impacted. This also applies if wars break out more frequently, restricting travel to specific areas.
in conclusion
To sum up, I think Airbnb is the most attractive investment among its three peers including Booking Holdings and Expedia. I believe its balance sheet, my expectations for future growth, and the associated margin of safety from a discounted earnings perspective make it a very compelling investment choice. While differences between platforms are currently subtle, Airbnb has more room to hone its niche in the online travel market and invest heavily in AI to become a leader in advanced AI-assisted travel booking services.
