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Airbnb Rated Outperform; RBC Says Valuation Premium Justified

Airbnb’s 'dominant customer engagement' is 'more than just a reopening trade,' RBC analyst Brad Erickson says, starting coverage at outperform.
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Airbnb  (ABNB) - Get Airbnb Inc. Report shares rose Thursday after RBC Capital Markets began coverage of the travel-housing platform with an outperform rating and a price target of $170.

“We like ABNB’s dominant customer engagement, view it as more than just a reopening trade with less appreciated secular tailwinds,” RBC analyst Brad Erickson wrote in a commentary cited by Bloomberg.

“Our property-manager checks suggest share gains are on the horizon, and we think supply maturity is further away than investors realize.”

The San Francisco company's stock recently traded at $141.21, up 4.8%. It has dropped 32% over the past three months as investors were concerned about the stock's valuation.

Erickson maintains that Airbnb’s valuation premium over competitors is justified, “given the differentiated brand, clear category leadership, share-gain potential and increasing optionality over time.”

The pandemic-sparked rise in household savings translates to “meaningful dry powder for booking trips,” he said.

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In other Airbnb news Thursday, it said it’s extending its global ban on parties, begun in August 2020, through at least the end of summer 2021.

“This policy has proven to be popular with our host community – the vast majority of whom already prohibited parties in their own rules.”

On May 17, Airbnb’s post-IPO lockup expired, permitting insiders to sell their shares for the first time since the company went public in December.

Earlier this month, Airbnb’s first-quarter revenue beat expectations, but its loss for the period came in wider than analysts had forecast.

Revenue totaled $886.9 million for the quarter, topping analysts’ forecast of $720.8 million.

Airbnb posted a loss of $1.95 a share, worse than the $1.17 analysts predicted.