As the COVID-19 crisis fades into the rearview mirror, Airbnb (NASDAQ: ABNB) should do it flower. However, as the trend of normalization in society accelerates, home rental platforms may face significant competition. With safety concerns headlining the news, ABNB’s stock could plunge as it may no longer represent a viable alternative lodging option, and I’m against the underlying companies. Be bearish.
Background on the possibilities and pitfalls of ABNB stocks
Basically, the pessimism on ABNB stock doesn’t negate the brilliance emanating from Airbnb. Uber Technologies (NYSE: Uber), Airbnb makes “dead” space economically available to property owners. On the other side of the equation, property renters get a lot out of lodging services.Again, just like Uber, in the sharing economy, eliminating the middleman allows him Two parties can meet each other’s needs.
In a way, ABNB shares represent the decentralization of travel. Travelers can transact directly with individual accommodation providers rather than submit to the hegemony of centralized authorities (i.e. established hoteliers). As with any decentralized protocol, it’s all fun and games until something goes wrong.
Unfortunately, too many people are acutely aware that the boomerang effect of decentralization is deregulation. So what makes ABNB stock questionable is the final regulation (and the competition this causes).
The tradedown effect may not immediately benefit Airbnb
Logically, most consumer-oriented businesses that compete on price understand the trade-down effect. Fundamentally, the concept is that, when faced with economic pressures (or incentives to curtail spending), consumers are willing to trade for alternative products or services until an acceptable balance between cost and quality is reached. is shown. For years, ABNB stocks have benefited from trade-down effects.
However, the trade-offs with this arrangement made it an unprofessional experience at times. For example, various publications cite user complaints about bed bugs, property theft, and lack of toilet etiquette. To be fair, a shoddy hotel can have the same problem.
What’s worrisome about ABNB stock, though, is that Airbnb customers typically have to pay more to enjoy a more professional experience. But as society normalizes from the COVID-19 pandemic, the price points between the reputable hotel and his Airbnb-backed unit could steadily approach parity.
In addition, ABNB’s stock may suffer from its service nightmare stay in extremes. without going into too much detail Guardian reported a story of a woman being assaulted in an apartment advertised by Airbnb. Basically the attacker got the entry via a duplicate key. This is a clear vulnerability and safety protocol risk.
To be clear, most Airbnb Experiences are criminal free. However, various jurisdictions could have serious problems with largely unregulated home rental services, especially if there were more such incidents. Therefore, whether the underlying company likes it or not, there will be regulated professional competition for ABNB shares.
Airbnb may be more overrated than you think
Financially, ABNB shares are healthy balance sheetNotably, the company’s cash-to-debt ratio is 4.11 times, higher than 77.21% for publicly traded companies in the travel and leisure industry.In addition, Airbnb has a three-year Earnings 20.5% growth and a strong historical net profit margin of 22.5%.
However, the obvious challenges of ABNB stocks center around their valuation. Currently, the market has a price-to-earnings ratio of 40.2 times, beating his peers’ 76.5%. Additionally, ABNB trades at a forward earnings multiple of 31.3, outperforming its sector rivals at 80.6%.
Frankly, ABNB’s stock could be even more overvalued. Because our expected earnings may not include the regulatory challenges we may face. Thankfully there are very few horror stories. Still, many people seem to be struggling with mental health issues during the pandemic, as evidenced by violent road rage and air rage incidents. You may be at risk.
Is ABNB Stock a Buy, According to Analysts?
Turning to Wall Street, ABNB stock has a moderate buy consensus rating based on 15 buy, 14 hold, and 3 sell ratings.of Average ABNB Price Target is $142.07, implying a 26.4% upside potential.
Takeaway: ABNB stock was too successful
To summarize the ABNB stock story, the underlying business may have been too successful. As more people join the platform, the risk of problems occurring rises mathematically. When the scariest of these issues make headline news, a customer may be reluctant to use his Airbnb.