Airbnb’s share cost has more than doubled from its situation cost of $68 per share in just a month considering the fact that its listing on the bourses. Now trading at $160.8 per share, the getaway rental marketplace may have no space left for improvement now, according to brokerage and investigation firm Credit Suisse. Initiating the coverage of the newly listed NASDAQ constituent, Credit Suisse gave ‘Neutral’ rating to the scrip with a target cost of $156, though cautioning of volatility. Airbnb has currently crossed the target cost, gaining 10% in the final 5 trading sessions.
Substitute to hotels
Credit Suisse sees Airbnb as a beneficiary of the ongoing substitution impact away from hotels. “Over the past decade, alternative accommodations as a share of total lodging have increased from ~6% to ~11% dollar share. This represents in our view an ongoing shift in consumer preference away from traditional to alternative lodging,” the report mentioned. This trend is anticipated to accelerate in the post-pandemic globe. Further, the pricing model of the firm, diverse from other such firms, is also noticed as a positive.
Accelerating monetisation
Going forward, in terms of pricing, Credit Suisse says that it expects Airbnb to enhance monetisation in two directions. These consist of — 1) Airbnb as the merchant of record in the transaction presently bears the payment processing charges, which it can pass on to hosts, and 2) optionality to launch an marketing/promotional tool for hosts, related to Amazon, eBay, and other marketplaces.
Airbnb’s management estimates a practically $1.5 trillion close to-term Serviceable Addressable Market (SAM) and a $3.4 trillion lengthy-term Total Addressable Market (TAM). “These figures contemplate the company operating within the current core short-term stays market in addition to further expanding into experiences and long term stays,” Credit Suisse mentioned.
Pandemic not that terrible
Further, the report added that development has been accelerated by the pandemic. “One of the key points from our investment thesis is that Airbnb’s use case proved more resilient than other existing travel options, as consumers sought to keep their families in their own protected bubble and eliminate the potential for interactions with others in elevators, lobbies, and other resort activities,” it mentioned. After bottoming out in April, domestic (US) as effectively as international travels have noticed development.
Target cost
While the target cost has been set at $156 per share by Credit Suisses, in a Blue Sky Scenario it expects the stock to surge to $200. “For the Blue Sky scenario, we use 2.95x EV/Bookings multiple, at the high end of Airbnb’s high-growth comparables to arrive at $200 per share,” the report mentioned. On the other hand, in a Grey Sky Scenario, Credit Suisse has a target of $104.