I just got through the S-1 for AirBnB and wanted to share my thoughts and also get other opinions.
It’s pretty obvious that Airbnb is one of the best businesses in terms of economics. They do not own the properties they just work as a “broker” to connect hosts and guests. This business is a lot like the other gig economy businesses except, AirBnB can be profitable because they don’t have the same issues that Uber/Lyft have of compensating their drivers. AirBnB hosts get to set their own prices for the property and then Airbnb takes a fee for facilitating the transaction.
AirBnb is the classic example of a network effect business since the increasing number of hosts on the platform increases the number of guests who use the platform. AirBnb does have some competition but with the size of their network, and as pointed out on the S-1 , the phrase “Airbnb” has become a vocabulary word for many people, I don’t see VRBO or other sites posing much of a threat.
Regulations are a concern as with the other gig economy businesses. Municipalities putting regulations on the amount on nights hosts can lend out there properties to others will negatively impact businesses. However, Airbnb properties is so diversified location wise again I don’t see much of a threat.
The rumored valuation for AirBnb is around 30B. In my opinion this is a bargain price. Using Airbnb 2019 numbers due to covid, Revenue in 2019 was around 4.8B, taking an average P/S of similar gig economy businesses like Uber (6.8), Lyft (4.4), and Grubhub (3.9) gets me a valuation of AirBnB of 24B. However I think Airbnb deserves a much higher multiple because they have a much clearer path to profitability and likely have higher growth long term then all of them. I think an 8-10 P/S is not unreasonable in this market making the valuation between 38-48B
These are just some initial thoughts and I’d love to hear other people’s opinions and have a discussion about the IPO.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.