Update: New Entry Price for Airbnb
Last week, I offered you some entry price guidance regarding the initial public offering (IPO) of Airbnb (Nasdaq: ABNB).
As you know, Airbnb is an online marketplace for people to rent out their homes.
As of September 30, it had 7.4 million available listings, 5.6 million of which were considered “active.” Using the successful model of eBay and Facebook, Airbnb becomes more powerful the more people use its website.
Case in point…
During the first nine months of 2020, 91% of all traffic to Airbnb came through “direct or unpaid channels.” To me, that’s a major reason Airbnb will be such a winner.
In other words, here in this post-COVID-19 world – I believe that Airbnb will represent a paradigm shift in how people travel and vacation.
Going into the IPO, here’s what I wrote…
Airbnb shares are expected to price around $50 per share, which would value it around seven times estimated 2021 sales of $4.3 billion. Sure, that’s more than the three to four times sales major hotel plays like Marriott and Hilton are valued at – but those hotel chains represent the old-economy leaders. Here in this post-COVID-19 world, I think having exposure to Airbnb is a smart idea – and paying seven times earnings seems reasonable to me. Right now, Booking Holdings (Nasdaq: BKNG) – formerly Priceline – is valued at eight times earnings, so Airbnb’s valuation is most certainly justified.
Based on this analysis, I told you to own some exposure to Airbnb anywhere between $60 and $70 per share.
I’m sure you know what happened next…
In an IPO boom reminiscent of the dot-com bubble, Airbnb went public and doubled on the first day of trading. What do they say about the best-laid plans? This move blew Airbnb way past my recommended entry price – which is why I’m offering you a second pricing update alert today.
Based on what we’ve now seen, here’s the plan…
I’d like to adjust our first entry price on Airbnb – and plan to add it on a move down to $100. We may need to be patient here because, clearly, the challenge for Airbnb is to now maintain a high level of investor engagement in the days and weeks ahead. If the shine of its new IPO wears off, it could pull back – and that’s when we can make our first entry. So, going forward, the new entry price is on a move down to $100. Let’s be patient and plan to strike if we see such a pullback. This would represent a good spot to get exposure if the first-day buying euphoria wears off.
Action Plan: While I am giving you a new buy price for Airbnb, my Trade of the Day Plus readers get so much more, including a full video breakdown on Airbnb that I just posted last week. I also track every stock recommendation in our active portfolio and provide sell alerts the moment we want to take profits. And right now, you can upgrade your membership to get these additional benefits – and more – by clicking here.