Categories Analysis, Industrials

Airbnb (ABNB) looks poised to emerge stronger from COVID. Here’s why

As part of its growth strategy, the management is reducing operating costs, especially marketing spend, to ease the pressure on margins

The impact of COVID on the travel sector was as unprecedented as the virus outbreak itself, with trip cancellations and flight groundings affecting all areas of the business. The vaccination drive and relaxation of restrictions have raised hopes that passenger traffic would recover sooner than initially estimated. After publishing its first quarterly report as a public company, rental booking company Airbnb Inc. (NASDAQ: ABNB) is bullish on its business prospects this year.

Wall Street Debut

When the Silicon Valley-headquartered online portal published its fourth-quarter report last month, it elicited mixed responses from investors, and the stock experienced volatility. Market experts are divided in their recommendations on the stock, with a not-so-impressive target price that represents muted growth. But, the company’s proven resilience and the stock’s stable performance in the weeks following the IPO makes it a reliable long-term bet.

The company went public in December 2020 in a blockbuster IPO that is touted as one of the biggest Wall Street has witnessed.

Resilience

Airbnb’s ability to adapt to adverse market conditions helped it in beating the COIVD blues to some extent. And, that is expected to give the company an edge when the market reopens and the travel industry comes out of the crisis. The resumption of air travel in key markets and the confidence brought on by the vaccine roll-out should expedite the recovery process.


Read management/analysts’ comments on quarterly reports


“So in 2021, our single priority is to prepare for the coming travel rebound. To do this, what we’re going to do is perfect the entire end-to-end experience of our core service. First, we’re going to educate the world about what makes Airbnb different, hosting. Through our marketing and communications, we will educate guests that being hosted is a better way to travel. In addition, we will inspire more people to become hosts. Next, we will recruit more hosts and set them up for success,” said chief executive officer Brian Chesky while interacting with analysts at the company’s first earnings conference call.

Cost-cutting

The question is will the positive factors reflect in Airbnb’s future financial performance? Taking a cue from the continuing uncertainty, which deepened after the resurgence in COVID infections, the management is slashing operating costs, especially marketing spend, thereby easing the pressure on margins.

The company reported a loss of $3.9 billion or $11.24 per share for the fourth quarter, which can mainly be attributed to costs associated with last year’s IPO. Revenues dropped 22% year-over-year to $859 million but surpassed both market watchers’ prediction and the management’s guidance.


After defying pandemic, IPO market is bracing for another busy year


Airbnb’s stock closed the last trading session at $175.36, after a relatively volatile week, but declined in Tuesday’s pre-market trading. The company’s market cap has grown about 25% since going public.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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