Airbnb stock has dazzled investors since its Nasdaq debut in December last year. From its initial public offering price of $68 per share, ABNB stock has soared as much as 223%, hitting an all-time high of 219.94 on Feb. 11.
Yet since then, the action has been more, shall we say, staid.
Airbnb (ABNB) has locked current shareholders into a trading range between 160 and 220. Whipsawing action has replaced the uptrend, albeit a brief one, that began with a breakout past a 175.07 proper buy point in a narrow, closet-width IPO base. And while shares rallied on Friday, getting as high as 178.25, investors may feel some frustration over how ABNB stock has made a full round trip of its gains.
At the same time, Airbnb still holds a lofty gain of more than 150% from its IPO price.
So, is it a buy now?
This story will analyze all facets of the innovator in leisure travel in terms of fundamentals, technicals and mutual fund ownership. All of these elements get inputted into IBD’s CAN SLIM methodology, a research-proven seven-point paradigm for successful growth stock investing.
Airbnb Stock: Is It A Buy Right Now?
This may confuse some investors: How can a stock like Airbnb show a weak Relative Strength Rating of 33 (on a scale of 1 to 99) when the stock has already gone up a lot from its initial offering price?
One reason: ABNB has traded just four months in the public market, and the RS Rating covers 12-month relative price performance. In general, you want to home in on companies that show an RS Rating of 85 or higher. Why? That way you’re selecting stocks already showing strength and ranking in the top 15% in terms of stock price strength.
When it comes to picking highflying growth stocks, those with superior price strength tend to make new highs, then keep going higher.
Also, the RS Rating places emphasis on the past three months of action. And since late January, ABNB stock in fact has actually fallen roughly 10%. So that underwhelming performance also hurts its relative strength score.
Keep an eye on the Accumulation/Distribution Rating, too. Right now, Airbnb gets a lowly D+ grade on a scale of A to E. This proprietary IBD rating measures the amount of heavy institutional buying vs. selling. A grade of C+ or higher denotes net institutional buying over the past 13 weeks; C- or lower points to net selling.
If you want a stock that is eagerly getting scooped by mutual funds, banks, hedge funds, pension plans, college endowments and the like, prefer those stocks with an A or B grade before you buy.
ABNB Stock Fundamentals Today
Travelers are keenly aware of the San Francisco-based firm’s disruptive business model: Allow house and condo owners turn their properties into short-term rentals. The idea has hatched plenty of competitors. Even large hotel chains offer similar properties in addition to their standard lodging accommodations. So, competition is truly fierce. Plus, coronavirus walloped the lodging industry in 2020. No wonder Airbnb’s revenue declined in three of its four quarters last year.
After a nominal pick-up in the top line in the first quarter of 2020, Airbnb saw its revenues fall 72%, 18% and 22% vs. year-ago levels in Q2, Q3 and Q4, respectively.
Over that same time frame, Airbnb lost a cumulative $1.74 a share. The company has 608 million shares outstanding.
Will business improve in 2021?
Right now, Wall Street thinks Airbnb will keep bleeding red ink, losing another $1.36 a share in 2021 and 33 cents a share in 2022. Analysts polled by FactSet also see revenue slipping 15% in the first quarter of this year to $716.3 million, but then rebound 195%, 27% and 59% vs. year-ago levels over the next three quarters of 2021.
So, any positive guidance on both the top and bottom lines could spark renewed buying in Airbnb stock.
For now, Airbnb’s 27 Earnings Per Share Rating means its profit record in the near and long term is superior to only 27% of all publicly traded companies. The SMR Rating, analyzing sales, profit margins and return on equity, sits at the lowest possible E grade.
The I In CAN SLIM: Institutional Ownership
Fortunately, mutual funds are increasingly accumulating ABNB stock.
MarketSmith data shows the total number of mutual funds owning a piece of Airbnb rose to 655 funds at the end of the first quarter vs. 630 in Q4 2020. Top funds holding a stake include Janus Henderson Enterprise Fund (JANEX), Franklin Growth (FKGRX), MFS Growth (MFEGX) and Barron Asset Retail (BARAX).
Management owns 2% of the entire company. The float, at 118.4 million shares, is a fraction of the 608.4 million shares outstanding. Individual investors should prepare for secondary offerings of closely held shares that could hit the stock in the future.
Airbnb Stock In A Nutshell
This means the stock is not in the right position to stage an outstanding breakout.
So, ABNB stock is not a buy right now. But watch for a great base to fully form. Patience could pay off in spades.
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