Airbnb (ABNB) Stays In Focus As Cramer Backs The Stock While Valuation Debate Builds

Airbnb (ABNB) is back in focus after Jim Cramer urged investors to stay long on the stock, following a second quarter update that featured higher revenue, gross booking value and nights booked.

At a share price of $189.43, Airbnb has seen strong recent momentum, including a 30 day share price return of 25.02% and a year to date share price return of 42.42%. The 1 year total shareholder return of 45.12% reflects how recent trading and earlier gains are combining into a solid overall outcome.

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Bulls point to Airbnb’s recent surge and solid profitability, while bears flag valuation risks after such a strong run. The next step is to see which side current pricing and fundamentals support.

Most Popular Narrative: 4.2% Overvalued

Airbnb’s most followed narrative pegs fair value at $181.84, slightly below the last close at $189.43, which puts a small premium on the current price.

The World Cup definitely helped Q2. Airbnb hosted millions of guests and more than 150,000 homes were listed by first-time hosts across host cities. That is great for acquiring users and hosts, but it is also a one-off event and investors should not extrapolate all of that growth forever.

Read the complete narrative.

The fair value hinges on a specific blend of revenue growth, high margins and a future earnings multiple that treats Airbnb more like a scaled tech platform than a travel stock. Curious which assumptions carry the most weight in that mix.

Result: Fair Value of $181.84 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Airbnb’s narrative still faces real tests, including tighter European regulation and the unresolved US$1.3b IRS dispute, both of which could weigh on sentiment.

Find out about the key risks to this Airbnb narrative.

Another View: SWS DCF Signals Upside For Airbnb

While the most popular Airbnb narrative points to a small premium over its fair value, our DCF model paints a very different picture. On that view, the stock at $189.43 screens as good value compared with an estimated future cash flow value of $297.24. Which story do you give more weight to?

For readers who want to see how those cash flows are built up step by step, our SWS DCF model is laid out in full, including the key levers that matter most to the final number. Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Airbnb for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 45 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With both optimism and concern running through the Airbnb story, now is the time to review the data yourself and decide where you stand. To see the key issues investors are weighing on both sides, start with the 3 key rewards and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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