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Stock of the Week: Airbnb

We’ve reached critical mass.

Andrew Willis 30 May, 2022 | 4:28AM
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Andrew Willis: Did you know that since its establishment, Airbnb (ABNB) has had to re-launch its website multiple times to generate enough interest in short-term rentals? And in 2008, after the third launch, the company still only had 800 properties listed.

Fast forward to today, and the company has 4 million hosts and has booked over a billion stays. Quite the leap from the days of having to do door-to-door marketing and posting links on Craigslist, and senior equity analyst Dan Wasiolek says it’s paid off.

Continued investment and word of mouth eventually drove an inflection point for Airbnb. A critical mass where the network of hosts and guests enter a virtuous cycle. And at 10% of the market now, the company isn’t slowing down with marketing to expand its network at a faster pace than competitors.

We feel as though Airbnb’s economic moat should help generate excess profits for at least another decade, with booking growth around an average of 17% annually until 2031. On the COVID front, we see variants having less of an impact going forward – but the biggest threats remain competition and regulation.

As an alternative accommodation business, regulatory risks persist which could hinder both supply and demand. And then there’s competition from the likes of Booking.com or Expedia… And consider Google, Facebook, Alibaba and Amazon – who shouldn’t have many issues reaching critical mass.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Airbnb Inc Ordinary Shares - Class A105.04 USD-1.52Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @AndrewWillisCDN.

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