Airbnb Inc.

The online marketplace for lodging.

Summary

Airbnb is a company in the process of building its leading alternative accommodations booking service into a platform that enables vacationers, property owners, experience providers and, importantly, a mobile workforce through a marketplace of services that create an unprecedented degree of fungibility in housing. Beyond simply providing an alternative to hotels for a vacationing family, Airbnb allows a property owner in one city to generate revenue to secure housing in another city. To the extent that a more mobile workforce will be a major feature of post-pandemic society, Airbnb will be a critical part of the ecosystem that enables it. Goldman Sachs sees this, and the platform optionality it creates, along with opportunities in travel and experiences, as one of the most significant early-stage growth propositions in the Internet sector.

While near-term pandemic related headwinds are likely to continue to weigh on financial performance, Airbnb’s share gains relative to others in the online travel space and the lodging space in general (Exhibit 16 - Exhibit 17) reflect the strength of its brand, with ~90% of traffic coming directly to the site, and the value of the marketplace model’s flexibility. With management having significantly reduced costs in the early days of the pandemic, aligning the cost structure around the core alternative accommodations business, the economics of the model at scale are among the most favourable that Goldman Sachs sees in the online travel space. That said, at ~17x ‘22 GSe Sales with a 3yr CAGR of 33% versus comps at 5x on 27% growth Goldman Sachs believes much of this outlook is priced into shares of ABNB already and will look for better entry points.

PM Summary

Airbnb is a company in the process of building its leading alternative accommodations booking service into a platform that enables vacationers, property owners, experience providers and, importantly, a mobile workforce through a marketplace of services that create an unprecedented degree of fungibility in housing. Beyond simply providing an alternative to hotels for a vacationing family, Airbnb allows a property owner in one city to generate revenue to secure housing in another city. To the extent that a more mobile workforce will be a major feature of post-pandemic society, Airbnb will be a critical part of the ecosystem that enables it. Goldman Sachs Investment Research sees this, and the platform optionality it creates, along with opportunities in travel and experiences, as one of the most significant early-stage growth propositions in the Internet sector.

While near-term pandemic related headwinds are likely to continue to weigh on financial performance, Airbnb’s share gains relative to others in the online travel space and the lodging space in general (Exhibit 16 - Exhibit 17) reflect the strength of its brand, with ~90% of traffic coming directly to the site, and the value of the marketplace model’s flexibility. With management having significantly reduced costs in the early days of the pandemic, aligning the cost structure around the core alternative accommodations business, the economics of the model at scale are among the most favorable that Goldman Sachs Investment Research sees in the online travel space. That said, at ~17x ‘22 GSe Sales with a 3yr CAGR of 33% versus comps at 5x on 27% growth Goldman Sachs Investment Research believes much of this outlook is priced into shares of ABNB already and will look for better entry points.

Key investment questions and topics

What’s the addressable market for Airbnb?

There are several components to the market that Airbnb addresses: lodging, experiences, short and long-term housing, host and traveler services, all of which are evolving and in some cases challenging to define. Prior to the pandemic, Goldman Sachs Investment Research estimates the addressable market for travel bookings was nearly $1.5tn annually with lodging making up ~40% of that total. The company sees the addressable market for experiences as $300bn, but growing to $1.4tn over the next 10+ years. While the size of the opportunity created by a more mobile workforce and the fungibility of real estate that Airbnb offers is difficult to quantify at this point, Goldman Sachs Investment Research believes its size could come to outweigh Airbnb’s current core opportunity over time. Regardless, with ~$23bn in bookings in 2020, Goldman Sachs Investment Research believes Airbnb’s current penetration into its addressable market is at most low single-digit percentage points.

What is the impact of the COVID pandemic and expected recovery?

While at its peak the pandemic drove booking declines of +90% among traditional the online travel agents, Airbnb saw bookings decline “only” 67% in 2Q (Exhibit 11). More importantly, the flexibility of the marketplace model allowed Airbnb to adapt to changes in demand and by 3Q bookings declined only 17% y/y, while the online travel agents (Booking, Expedia) still experienced nearly 60% declines on average. This came as Airbnb became not only a place to book alternative accommodations viewed as safer than hotels, but also a place to book housing for months as people left cities for less dense alternatives.

While the resurgence of lockdowns has had a negative impact on the leisure travel component of the business, as travel activity begins to increase Goldman Sachs Investment Research expects that the broader selection of accommodation types and locations offered by Airbnb will continue to drive travellers to the platform. For context, Goldman Sachs Investment Research's expected bookings recovery has Airbnb’s 2021 GBV returning to 92% of 2019 levels, compared with ~55% at the online travel agents, as people continue to choose short-distance travels, safer alternatives to hotels, and long-term stays amid the pandemic. Beyond the pandemic, Goldman Sachs Investment Research believes the consumer adoption that Airbnb is seeing currently will lead to ongoing growth and engagement as travellers choose to take advantage of the platform’s broad offerings and a workforce / student population with more flexibility leverages Airbnb to enable that lifestyle.

Can Airbnb expand its take rate?

Though the 3% Airbnb charges hosts on average is considerably lower than the roughly 15% online travel agents charge hotels, Airbnb charges travellers a booking fee (Exhibit 2) that results in a total take rate of ~13%, with a 12.7% bookings margin (net revenue as % of gross booking value) reported in 2019. While Goldman Sachs Investment Research doesn’t expect Airbnb will look to raise take rates on a standalone basis, it does expect the company will continue to develop value-add services for travellers and hosts that will add to the company’s revenue growth relative to bookings. Goldman Sachs Investment Research expects the company will add at least 100bps to booking margins over the next 3-5 years by offering financing, home upkeep, concierge, and other services.

What are the competitive risks?

As with the rest of the travel space, Goldman Sachs Investment Research sees Google as the biggest competitive risk to Airbnb. While Goldman Sachs Investment Research doesn’t see Google getting into the alternative accommodations space directly, at least not in the near/medium term, its position at the top of the funnel for so many travellers does represent the biggest risk that Goldman Sachs Investment Research sees to Airbnb’s +90% organic traffic as the company looks to grow both its supply of hosts and travellers. Beyond Google, Expedia’s Vrbo and Booking.com’s supply of alternative accommodations represent some competitive threat, as do other regional competitors and potential new entrants. That said, Goldman Sachs Investment Research believes that the challenged financial position of the online travel agents and the traffic challenges they currently face limit their ability to effectively compete.

How much of a risk are regulatory issues?

Major cities around the world have viewed Airbnb as violating local ordinances governing rent control, zoning, public safety, and taxation, among others. The company has negotiated solutions with many of these jurisdictions that in many cases involved taking down large numbers of listed properties, restricting certain types of stays, and collecting/remitting lodging and other taxes. Despite these efforts, Airbnb still has a number of these issues outstanding, though Goldman Sachs Investment Research believes the company will be able to address these in largely the same way. Uniquely, the company is the only US internet company with a significant presence in China. This creates risks both in terms of the company’s ability to operate in the country and in the data that must be communicated.

Valuation & key risks

Goldman Sachs' $143 price target (12-month) is based on 16x 2022E EV/Sales, or approximately 3x the online travel agents average of 5x, in line with Airbnb’s ~3x faster growth rate over the ’19-’24E period, attempting to normalize for the distortion of the pandemic. In addition, Goldman Sachs Investment Research's 16x 2022E EV/Sales implies nearly 50x Discounted 2028E EBITDA (Exhibit 23) on a 55% 3yr CAGR (2022-’25E) which is roughly in-line with historical growth-adjusted EBITDA valuation across the Internet sector where EV/EBITDA/growth has trended around 0.8-0.9x. (vs. 0.85x implied for ABNB).

Key risks: (+) User growth, experiences opportunity, stronger travel recovery; (-) Regulation, competition, rising customer acquisition costs, and weaker travel recovery.

Company overview

Airbnb operates a global alternative accommodation (short-term stay, vacation rental) marketplace, allowing hosts to offer stays and experiences to guests through the company’s platform across the web and mobile devices. Listings on the platform include private rooms, entire homes, luxury villas, treehouses, igloos, and a wide variety of experiences, in roughly 100k cities across 220+ countries/regions. Airbnb generates revenue through service fees, net of incentives and refunds, charged to both hosts and guests that are recognized upon check-in. Gross Bookings Value (GBV) represents the total dollar value of all bookings made on the platform in a period. GBV is inclusive of host earnings, service fees, cleaning fees, and taxes, net of cancellations and alterations.

In 2019, the geographic split of nights/experiences booked based on listing region was 43% EMEA, 29% North America, 18% APAC, and 10% LatAm. With differences in average daily rate across regions, this split of nights/experiences resulted in a GBV mix of 38% EMEA, 42% NA, 13% APAC, and 7% LatAM in 2019.

Total Nights & Experiences grew 31% y/y in 2019 to 327mn, driving GBV to $38bn (+29% y/y) led by healthy growth across regions. The majority of the platform’s bookings have come from nights. In 2019, revenue grew 32% to reach $4.8bn representing a bookings margin of 12.7% (vs. 12.4% in 2018). Adj. EBITDA losses widened to $253mn with margins (as % of GBV) deteriorating by 130 bps to -0.7% on investments in growth initiatives and technical infrastructure.

Over the longer-term, the company expects EBITDA margins of greater than 30% (as % of sales) on greater scale and operational efficiencies.

Growth

Gross Booking Value growth is primarily a function of Nights / Experiences bookings growth and gross daily rates.

1. Nights / Experiences growth. Owing to declines in bookings in 9M20 driven by COVID-19, Goldman Sachs Investment Research expects 2020 Nights / Experiences to decline by 44% and grow at a CAGR of 40% between FY20-23E benefiting from the following factors:
   1. Listings growth. With the platform unlocking the potential for hosts to earn supplemental income by listing rooms/homes, the number of active listings increased 30% in 2019 to 5.7mn. By making the onboarding process seamless and empowering hosts with information and tools to manage their listings, Airbnb continues to see strong growth in the number of hosts on the platform and high retention among hosts. In 2019, the number of hosts grew 21% while 84% of revenue came from stays with existing hosts (at least one completed guest check-in before Dec-2018). As of 9M20, active listings have stayed stable at 5.6mn with deterioration in host revenue retention owing to bookings decline.
   2. Guests growth. Through the platform, guests look to experience unique stays that were difficult to access before Airbnb, experience places the way locals do, live in spaces that feels like home, and are competitively priced vs. hotels. The company has seen strong guest growth, reaching 54mn in 2019 (+30% y/y vs. +40% in 2018). The company enjoys strong guest loyalty owing to its large global network, unique experiences offered, and product innovation. 69% of the total revenue last year came from stays by repeat guests with at least one prior booking. For the 9M20 period, the platform has still seen 14mn new active bookers with deterioration in guest revenue retention owing to bookings decline.
   3. Global coverage. Guests get to choose authentic experiences (including cabins, farms, boats, castles, yurts, igloos, treehouses, lighthouses, private islands) from a wide coverage of listings spanning roughly 100k cities across 220+ countries and regions, many of which are not served by hotels. As per a report commissioned by Airbnb in 2018, at least 2/3rds of guest arrivals took place outside traditional tourist districts even in popular destinations. Expanding further and primarily increasing depth in earlier stage geographies will be a tailwind for growth long-term.
   4. Opportunities in length of stay. Long-term stay was one of the fastest growing categories for the company in 2019. During the 9M20 period, while short-term stay bookings declined ~81% y/y in April, long-term stay declined only 13% in this month and saw y/y growth between May and September 2020. 24% of the total nights booked on the platform were long-term stays (vs. 14% in 2019 and 13% in 2018). Beyond the current pandemic, Goldman Sachs Investment Research sees opportunities for the lines between work and travel to blur further as work-from-home enables longer-term stays.
2. Gross daily rate. Gross daily rate rose 16% y/y in 3Q20 to $130 owing to faster recovery in North America and mix-shift towards entire home listings in non-urban destinations which have higher daily rates. Goldman Sachs Investment Research expects daily rates to be at ~$124 for FY20 & 2021 and decline until 2023 as pricing trends normalize post-COVID and lower rate regions (e.g., LatAm) increase within the overall mix.

Profitability

Adj. EBITDA losses widened to $253mn in 2019 with margins deteriorating by ~130bps to -0.7% (as % of GBV) on investments in growth initiatives and technical infrastructure. Near-term, Goldman Sachs Investment Research expected in investments in product to drive some deleverage as the company continues to invest in its platform and product. Over the longer-term, the company expects EBITDA margins of greater than 30% on scale benefits to gross margin and leverage on sales & marketing.

Team

Co-founder and Chief Executive Officer

Brian Chesky is the co-founder and Chief Executive Officer of Airbnb and sets the vision and strategy for the company. In 2007, Brian and Joe Gebbia became Airbnb’s first Hosts. Since then, Brian has overseen Airbnb’s growth to become a community of over four million Hosts who have welcomed more than 1 billion guests across 220+ countries and regions.

A graduate from the Rhode Island School of Design, Brian has embedded his creative roots in Airbnb’s culture, product and community. This design-driven approach has enabled a system of trust that allows strangers to live together, and created a unique business model that facilitates connection and belonging.

Brian is a signatory to the Giving Pledge and has committed to donating the net proceeds of his CEO equity compensation to community, philanthropic and charitable causes. Originally from Niskayuna, New York, Brian is an Airbnb Experience Host in San Francisco.

Co-Founder, Chief Strategy Officer, Chairman of Airbnb China

Nate Blecharczyk is the co-founder of Airbnb, Chief Strategy Officer, and Chairman of Airbnb China. Nate plays a leading role in driving key strategic initiatives across the global business, particularly those which require a combined understanding of the business, product, and data. Recently he oversaw the creation of the Airbnb City Portal, an industry-first software solution that addresses the needs of cities relating to short-term rentals. Previously Nate oversaw the creation of Airbnb’s engineering, data science, payments, and performance marketing teams.

Nate holds a Bachelor of Science degree in Computer Science from Harvard University. As a guest, Nate has stayed in hundreds of homes using Airbnb and he is also a Host in San Francisco, where he lives with his family. Nate and his wife Elizabeth are signatories to the Giving Pledge.

Co-founder and Chairman of Airbnb.org

Joe Gebbia is the co-founder of Airbnb and Chairman of Airbnb.org, an independently operated 501(c)3. As a community-powered non-profit, Airbnb.org helps to connect those in crisis with places for them to stay as part of its emergency response efforts related to natural disasters, the COVID-19 pandemic, and global refugee crisis.

Joe began his life as an artist and graduated from the Rhode Island School of Design (RISD) where he earned dual degrees in Graphic Design and Industrial Design, and currently serves on the RISD Board of Trustees. Joe is an Airbnb.org host and signatory to the Giving Pledge.

Industry overview

Addressable Market

As per the company, the serviceable addressable market (SAM) amounts to $1.5Tn, comprised of a short-term stays market of $1.2Tn (based on the company’s estimate of 6.5bn paid overnight trips) and a ~$300bn market for Experiences (based on global tourist spend on attractions & experiences). Expanding this over the next 10+ years to incorporate growth in population, higher trip frequency, adding longer-term stays, and expanding experience opportunities equates to a TAM of ~$3.4Tn (Short-term stays: $1.8Tn; Experiences: $1.4Tn, Long-term stays: $200bn). Based on Gross Bookings of $37.9bn in 2019, the company’s SAM penetration reached ~2.5%.

Competition

Apart from hotels which have been promoting direct channels and focusing on loyalty programs, Airbnb competes primarily with Booking.com and Expedia in the travel accommodation space. As the company has scaled up its operations over the past few years, the number of nights & experiences booked on the platform has reached the levels of Expedia’s (Exhibit 9) in recent times.

In terms of booking margin, the delta with Booking.com (Exhibit 10) reflects the scope for uptick in host fees (which currently account for ~3% of overall booking value). However, instead of aggressively increasing host fees, Goldman Sachs Investment Research believes the company is more likely to focus on generating additional revenue by offering ancillary services such as financing, home upkeep, concierge, and other services, in order to support host growth and retention.

Airbnb’s gross bookings grew nearly 5x of Booking/Expedia’s between 2Q-4Q19 (Exhibit 11) as the latter faced the twin challenges of Google’s meta search platform and hotel supplier’s direct efforts. With the onset of the pandemic in 2020, Airbnb’s gross bookings have recorded sharp declines, although still lower than the ones recorded by Booking and Expedia. As lockdown restrictions eased across geographies and travel recovered during the summer months of 3Q20, gross bookings at Airbnb declined only by 17%, in sharp contrast to the 45%+ declines experienced by the other online travel agents. Goldman Sachs Investment Research attributes this out-performance to the differentiated inventory offered by Airbnb which under pandemic protocols came to be viewed a safer option to hotels and as an alternative to long-term rentals for people who left cities for less dense alternatives. Even with the online travel agents trying to grow their alternative accommodation business, Goldman Sachs Investment Research believes their stretched balance sheets (2020E net debt of $5.2bn and $2.0bn ex-investments for Expedia & Booking.com, respectively) are likely to limit their ability to invest in this space.

Traffic

Comparing traffic across Airbnb and online travel agents such as Booking.com and Expedia highlights Airbnb’s stronger growth in traffic and engagement over the last one year. In-line with the gross bookings data, Airbnb saw higher traffic growth than its peers in the pre-COVID months and recorded fewer declines during 2Q20 when the travel industry was the worst affected. While travel activity recovered to some extent in 3Q, trends have softened in 4Q as per reported data from online travel agents and comScore (Exhibit 12). However, in the scenario of a longer-term recovery in the travel space going forward, Goldman Sachs Investment Research believes, Airbnb’s differentiated inventory and solid brand positions it better than its peers.

Investment framework

Within Goldman Sachs Investment Research's investment framework, it looks for companies exposed to the strongest growth drivers, high degrees of operating leverage, management focus on disruptive innovation within large underlying industries, and, in a sector that offers few of them, real competitive barriers or sustainable advantages in technology, scale, and/or business model. In particular, Goldman Sachs Investment Research looks for strong network effects, a high ratio of revenue to customer acquisition costs, and strategies to exploit the growth in internet as a whole.

Upon determining attractive and sustainable business models, Goldman Sachs Investment Research layers on valuation to determine its best investment ideas. Goldman Sachs Investment Research looks for attractive valuations relative to the growth rates and returns that Goldman Sachs Investment Research believes companies can sustain. Those are the companies that Goldman Sachs Investment Research believes investors will be best served to own, particularly when current growth multiples undervalue those opportunities in its framework.

Based on Goldman Sachs Investment Research's growth, leverage, innovation, and competition (GLIC) framework analysis and the stock’s current valuation, it believes Airbnb (ABNB) warrants a Neutral rating.

Growth

Pre-pandemic, Airbnb grew at a significantly faster rate than its peers, albeit from a smaller base and recorded smaller declines during 2Q20 which was the worst affected quarter for all travel companies (Exhibit 16 - Exhibit 17). During this period, long-term stays was one of the growth drivers for the company with positive growth y/y every month between May–September amid the work-from-home option followed by people across the globe. With this flexibility likely continuing beyond the current pandemic, Goldman Sachs Investment Research sees further growth opportunities being driven by Airbnb’s long-term stay offering as well as the liquidity it creates for property owners.

Additionally, with any recovery in travel, Goldman Sachs Investment Research expects the company to be better positioned for customers seeking unique experiences at competitive rates versus hotels. While Airbnb’s Gross Booking Value was ~30% of the average GBV of Booking.com and Expedia in 2018, Goldman Sachs Investment Research expects this share to go to 60% by FY24 (Exhibit 16).

Leverage

The company acquires customers through both paid and direct channels, with 77% of traffic coming unpaid or direct in 2019 vs. 91% unpaid or direct in 9M20. Airbnb’s unique supply (relative to hotel-heavy peers) and strong brand, in Goldman Sachs Investment Research's view, enable the company to better navigate many of the high-cost paid channels (e.g., Google) its online travel peers (Booking Holdings, Expedia, etc.) are more reliant on. In addition, nearly 70% of revenue was generated by repeat guests in 2019 (vs. ~50% in 2015), further driving customer acquisition efficiencies. On other side of its marketplace, existing hosts and direct host relationships drive supply efficiency, too. In 2019, more than 80% of revenue came from existing hosts while ~80% of hosts that joined the platform in 2019 came directly. Goldman Sachs Investment Research believes these factors have enabled the company to gain higher sales & marketing spend efficiencies as compared to its other online travel agents (Exhibit 18). Goldman Sachs Investment Research measures leverage as incremental margin, which is calculated as (2023 adjusted EBITDA – 2019 adjusted EBITDA) / (2023 sales – 2019 sales), using GS estimates. Airbnb ranks 8th in Goldman Sachs Investment Research's coverage group on leverage.

Innovation

Enabling people to trust strangers and share/live in their accommodations is a key innovation introduced by the company in the travel space. This has been facilitated by seamless communication between hosts & guests prior to booking, secure global online payments for booking purposes, setting up cleanliness standards, background checks in specific countries and sharing reviews of the place on the platform post-stay. During 2019, 85% of the overall stays had at least one review from the host or a guest. Goldman Sachs Investment Research uses a 50%/50% blend of TTM product development expense and TTM product development expense as a percentage of gross profit to quantify the level of innovation at a company. Airbnb ranks 7th on innovation in Goldman Sachs Investment Research's coverage owing to its high absolute dollar R&D spend and as % of gross profit.

Competitive advantage

Goldman Sachs Investment Research measures competitive advantage using a 50%/50% blend of (i) a qualitative (1-4) rank where 4 represents high levels of competitive advantage and (ii) NTM market share for the respective addressable markets. Airbnb ranks 12th in Goldman Sachs Investment Research's coverage in terms of competitive advantage. The company’s competitive moat lies in its differentiated accommodation offerings spanning private rooms, entire houses, luxury villas, treehouses, igloos, cabins, castles boats and a wide variety of experiences, in roughly 100k cities across 220+ countries/regions. Customers choose the platform as they get to live in unique places that may not be accessible otherwise and also get to experience newer markets the way locals do. While the major online travel agents are focusing on growing their alternative accommodation business, search results for apartments on these platforms are often skewed towards smaller, independent hotels. From a supply perspective, hosts’ preference towards Airbnb as compared to traditional online travel agents is more likely to stem from greater customer support availability and lack of channel conflicts at the former. Additionally, Goldman Sachs Investment Research believes Airbnb’s strong brand drives lower customer acquisition costs, greater customer loyalty which could create upside for its growth flywheel over time.

Financial model

Goldman Sachs Investment Research believes Airbnb’s growth will be driven mostly by nights/experiences growth (40% CAGR between 2020-23) as the opportunity expands beyond travel to longer-term stays. Goldman Sachs Investment Research expects GBV/booking to decline to $112 by 2024 (vs. Goldman Sachs Investment Research's expectation of $124 in 2020) as the mix-shift impact from booking of entire home listings moderates and pricing trends normalize post-COVID with lower rate regions (e.g., LatAm) increasing within the overall mix.

Goldman Sachs Investment Research expects Adj EBITDA profitability beginning in H2 2021 vs. -5.3% (-0.7% of Bookings) in 2019 driven by strong top-line performance alongside scale benefits delivering operating leverage primarily within sales & marketing as well as efficiencies in gross margin.

Goldman Sachs Investment Research forecasts adjusted EBITDA margins expanding to 15.3% of revenue (2.1% of Bookings) by 2023 though Goldman Sachs Investment Research anticipates the company will continue to invest in the business to drive growth, putting the company’s longer term target margins of greater than 30% of sales well beyond the window that Goldman Sachs Investment Research forecasts.

Seasonality. Seasonality is reflected in the company’s financial performance with bookings building during 1H before trailing off in 2H, but due to revenue being recognized at check-in, Q3 historically represents the strongest quarter for revenue contribution. Particularly in North America and Europe where the company has significant exposure. Higher unearned fees (from service fees collected at time of bookings) in the first two quarters contributes to higher FCF during this period.

Competition

Airbnb operates in a highly competitive environment. As Airbnb seeks to expand its community globally, it faces competition in attracting Hosts and guests.

Competition for Hosts

The company competes to attract and retain Hosts to and on its platform to list their homes and experiences, as Hosts have a range of options for doing so. Airbnb competes for Hosts based on many factors including the volume of bookings generated by guests, ease of use of its platform, the service fees it charges, Host protections, such as those included in AirCover, and its brand. Airbnb believes that Hosts can earn more per night on its platform than other travel platforms due to its guest demand, its host tools that empower hosts to be successful, and its community built on trust and human interaction.

Competition for Guests

Airbnb competes to attract and retain guests to and on its platform, as guests have a range of options to find and book accommodations and experiences. It competes for guests based on many factors, including unique inventory and availability of listings, the value and all-in cost of Host offerings on its platform relative to other options, its brand, ease of use of its platform, the trust and safety of its platform, and community support. Throughout the COVID-19 pandemic, the company has also competed based on the availability of inventory close to where guests live and in non-urban markets, as well as the perceived safety and cleanliness of listings on its platform.

Its competitors include:

• Online travel agencies (OTAs), such as Booking Holdings (including the brands Booking.com, KAYAK, Priceline.com, and Agoda.com); Expedia Group (including the brands Expedia, Vrbo, HomeAway, Hotels.com, Orbitz, and Travelocity); Trip.com Group (including the brands Ctrip.com, Trip.com, Qunar, Tongcheng-eLong, and SkyScanner); Hopper; Meituan Dianping; Fliggy (a subsidiary of Alibaba); Despegar; MakeMyTrip; and other regional OTAs;
• Internet search engines, such as Google, including its travel search products; Baidu; and other regional search engines;
• Listing and meta search websites, such as TripAdvisor, Trivago, Mafengwo, AllTheRooms.com, Hometogo, Holidu, and Craigslist;
• Hotel chains, such as Marriott, Hilton, Accor, Wyndham, InterContinental, OYO, and Huazhu, as well as boutique hotel chains and independent hotels;
• Property management companies, such as Vacasa, Sonder, Inspirato, Evolve, Awaze, and other regional property management companies;
• Chinese short-term rental competitors, such as Tujia, Meituan B&B, and Xiaozhu; and
• Online platforms offering experiences, such as Viator, GetYourGuide, Klook, Traveloka, and KKDay.

Airbnb believes it competes favourably based on multiple factors, including the differentiated breadth and depth of stays and experiences offered on Airbnb, its global scale and geographic reach, the strength and loyalty of its Host and guest community, its brand, organic traffic, its platform functionality, including community support, payments, and Host protections, and the extensibility of its platform.

Financials

Historic

Income statement

Year	1	2	3	4	5	6	7	8	9	10	11	12	13
Year end date	31/12/2009	31/12/2010	31/12/2011	31/12/2012	31/12/2013	31/12/2014	31/12/2015	31/12/2016	31/12/2017	31/12/2018	31/12/2019	31/12/2020	31/12/2021
Revenues ($'million)							$919	$1,656	$2,562	$3,652	$4,805	$3,378	$5,992
Gross profits ($'million)
Operating profits ($'million)
Net profits ($'million)							-$135	-$147	-$70	-$17	-$674	-$4,585	-$352

Most recent quarter

During the three months ended 31st March 2022, net income increased to $3.32 billion on revenues of $18.76 billion, representing a respective increase of 7x and 81% compared to the prior year, and equating to a net income margin of 18%. The company ended the quarter with cash of $18.01 billion, representing an increase of 2% from the end of 2021.

Most recent year

For the fiscal (and calendar) year 2021, Airbnb reported a net income of $5.52 billion. The annual revenue was $53.8 billion, an increase of 71% over the previous fiscal year.

Forecasts

What are the financial forecasts?

Income statement

Income statement

Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24	25	26	27	28	29	30	31	32	33	34	35	36	37	38	39	40	41	42
Year end date	31/12/2022	31/12/2023	31/12/2024	31/12/2025	31/12/2026	31/12/2027	31/12/2028	31/12/2029	31/12/2030	31/12/2031	31/12/2032	31/12/2033	31/12/2034	31/12/2035	31/12/2036	31/12/2037	31/12/2038	31/12/2039	31/12/2040	31/12/2041	31/12/2042	31/12/2043	31/12/2044	31/12/2045	31/12/2046	31/12/2047	31/12/2048	31/12/2049	31/12/2050	31/12/2051	31/12/2052	31/12/2053	31/12/2054	31/12/2055	31/12/2056	31/12/2057	31/12/2058	31/12/2059	31/12/2060	31/12/2061	31/12/2062	31/12/2063
Revenues ($'million)	$78,935	$112,257	$154,816	$207,049	$268,527	$337,721	$411,894	$487,157	$558,739	$621,448	$670,282	$701,078	$711,102	$699,445	$667,163	$617,116	$553,551	$481,510	$406,171	$332,253	$263,564	$202,749	$151,247	$109,414	$76,757	$52,217	$34,448	$22,038	$13,673	$8,226	$4,799	$2,715	$1,490	$793	$409	$205	$99	$47	$21	$9	$4	$2
Gross profits ($'million)	$23,680	$33,677	$46,445	$62,115	$80,558	$101,316	$185,352	$219,221	$251,432	$279,652	$301,627	$315,485	$319,996	$314,750	$300,223	$277,702	$249,098	$216,679	$182,777	$149,514	$118,604	$91,237	$68,061	$49,236	$34,541	$23,498	$15,502	$9,917	$6,153	$3,702	$2,160	$1,222	$670	$357	$184	$92	$45	$21	$10	$4	$2	$1
Operating profits ($'million)	$11,840	$16,839	$23,222	$31,057	$40,279	$50,658	$123,568	$146,147	$167,622	$186,434	$201,085	$210,323	$213,331	$209,834	$200,149	$185,135	$166,065	$144,453	$121,851	$99,676	$79,069	$60,825	$45,374	$32,824	$23,027	$15,665	$10,335	$6,612	$4,102	$2,468	$1,440	$815	$447	$238	$123	$61	$30	$14	$6	$3	$1	$1
Net profits ($'million)	$9,354	$13,302	$18,346	$24,535	$31,820	$40,020	$97,619	$115,456	$132,421	$147,283	$158,857	$166,156	$168,531	$165,769	$158,118	$146,256	$131,192	$114,118	$96,263	$78,744	$62,465	$48,052	$35,846	$25,931	$18,191	$12,376	$8,164	$5,223	$3,240	$1,949	$1,137	$643	$353	$188	$97	$48	$24	$11	$5	$2	$1	$0

What are the assumptions used to estimate the financial forecasts?

Key inputs

Description	Value	Commentary
Revenue
What's the estimated current size of the total addressable market?	$2,975,000,000	Here, the total addressable market (TAM) is defined as the global automotive market, and based on a number of assumptions, it is estimated that the size of the market as of today (30th May 2022), in terms of revenue, is $2.975 billion.
What's the estimated terminal annual growth rate of the total addressable market?	3%	Research shows that the growth rate of the global automotive market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022).
What's the estimated company peak market share?	10%	Stockhub estimates that the peak market share of Airbnb is around 10%, and, therefore, suggests using the share amount here. As of 31st December 2021, Airbnb's current share of the market is around 1.8%.
Which distribution function do you want to use to estimate company revenue?	Gaussian	Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function (i.e. the revenue distribution is bell shaped), so Stockhub suggests using that function here.
What is the estimated company lifespan?	60 years	Airbnb employs around 110,000, making the company a large organisation (more than 10,000 employees), and research shows that the average lifespan of a large corporation is around 50 years.
What's the estimated standard deviation of company revenue?	6 years	Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Airbnb's current revenue amount (i.e. $54 billion) and Airbnb's estimated lifespan (i.e. 60 years) and Airbnb's estimated current stage of its lifecycle (i.e. growth stage), the Stockhub company suggests using 6 years (i.e. 68% of all sales happen within 6 years either side of the mean year), so that's what's used here.
Growth stages
How many main stages of growth is the company expected to go through?	4 stages	Research suggests that a company typically goes through four distinct stages of cash flow growth. Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation. In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company. A summary of the economic links to cash flow patterns can be found in the appendix of this report. Stockhub estimates that with Airbnb's operating cash flows positive (+), investing cash flows negative (-) and its financing cash flows positive (+), the company is in the second stage of growth (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth.
What proportion of the company lifecycle is represented by growth stage 1?	30%	Research suggests 30%.
What proportion of the company lifecycle is represented by growth stage 2?	10%	Research suggests 10%.
What proportion of the company lifecycle is represented by growth stage 3?	20%	Research suggests 20%.
What proportion of the company lifecycle is represented by growth stage 4?	40%	Research suggests 40%.
Growth stage 2
Cost of goods sold as a proportion of revenue (%)	70%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 70%.
Operating expenses as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 15%.
Tax rate (%)	21%	Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. Airbnb mainly operates in the United States, and the marginal tax rate there is 21%.
Depreciation and amortisation as a proportion of revenue (%)	5%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 5%.
Fixed capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 15%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	Stockhub suggests that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	Stockhub suggests that for simplicity, the interest amount figure is zero.
Growth stage 3
Cost of goods sold as a proportion of revenue (%)	55%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the margin for its peers is 55%.
Operating expenses as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the margin for its peers is 15%.
Tax rate (%)	21%	Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. Airbnb mainly operates in the United States, and the marginal tax rate there is 21%.
Depreciation and amortisation as a proportion of revenue (%)	5%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 5%.
Fixed capital as a proportion of revenue (%)	3%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 3%.
Working capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%.
Net borrowing ($000)	Zero	Stockhub suggests that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	Stockhub suggests that for simplicity, the interest amount figure is zero.
Growth stage 4
Cost of goods sold as a proportion of revenue (%)	55%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the margin for its peers is 55%.
Operating expenses as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the margin for its peers is 15%.
Tax rate (%)	21%	Research suggests that it's best to use the marginal tax rate of the country in which the company mainly operates. Airbnb mainly operates in the United States, and the marginal tax rate there is 21%.
Depreciation and amortisation as a proportion of revenue (%)	5%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 5%.
Fixed capital as a proportion of revenue (%)	3%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 3%.
Working capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%.
Net borrowing ($000)	Zero	Stockhub suggests that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	Stockhub suggests that for simplicity, the interest amount figure is zero.

Risks

As with any investment, investing in Airbnb carries a level of risk. Overall, based on the key risks highlighted below, the degree of risk associated with an investment in Airbnb is high.

Risks related to the business

1. The COVID-19 pandemic and the impact of actions to mitigate the COVID-19 pandemic have materially adversely impacted and may continue to materially adversely impact its business, results of operations, and financial condition.
2. Airbnb has incurred net losses in each year since inception, and Airbnb may not be able to achieve or sustain profitability.
3. Airbnb's Adjusted EBITDA and Free Cash Flow have declined in prior periods, and this trend could continue
4. Airbnb's revenue growth rate has slowed over time, and Airbnb expects it to continue to slow in the future.
5. If Airbnb fails to retain existing Hosts or add new Hosts, or if Hosts fail to provide high-quality stays and experiences, its business, results of operations, and financial condition would be materially adversely affected.
6. If Airbnb fails to retain existing guests or add new guests, its business, results of operations, and financial condition would be materially adversely affected
7. Any further and continued decline or disruption in the travel and hospitality industries or economic downturn would materially adversely affect its business, results of operations, and financial condition.
8. The business and industry in which Airbnb participates are highly competitive, and Airbnb may be unable to compete successfully with its current or future competitors.
9. Laws, regulations, and rules that affect the short-term rental, long-term rental, and home sharing business have limited and may continue to limit the ability or willingness of Hosts to share their spaces over its platform and expose its Hosts or us to significant penalties, which have had and could continue to have a material adverse effect on its business, results of operations, and financial condition.
10. Airbnb is subject to a wide variety of complex, evolving, and sometimes inconsistent and ambiguous laws and regulations that may adversely impact its operations and discourage Hosts and guests from using its platform, and that could cause us to incur significant liabilities including fines and criminal penalties, which could have a material adverse effect on its business, results of operations, and financial condition.
11. Airbnb is subject to regulatory inquiries, litigation, and other disputes, which have materially adversely affected and could materially adversely affect its business, results of operations, and financial condition.
12. Airbnb could face liability for information or content on or accessible through its platform.
13. Home sharing may not achieve global acceptance.
14. Maintaining and enhancing its brand and reputation is critical to its growth, and negative publicity could damage its brand and thereby harm its ability to compete effectively, and could materially adversely affect its business, results of operations, and financial condition.
15. Host, guest, or third-party actions that are criminal, violent, inappropriate, or dangerous, or fraudulent activity, may undermine the safety or the perception of safety of its platform and its ability to attract and retain Hosts and guests and materially adversely affect its reputation, business, results of operations, and financial condition.
16. Measures that Airbnb is taking to improve the trust and safety of its platform may cause us to incur significant expenditures and may not be successful.
17. Growing focus on evolving environmental, social, and governance issues (ESG) by shareholders, customers, regulators and other stakeholders may impose additional risks and costs on its business.
18. Airbnb relies on traffic to its platform to grow revenue, and if Airbnb is unable to drive traffic cost-effectively, it would materially adversely affect its business, results of operations, and financial condition.
19. Airbnb's indebtedness could materially adversely affect its financial condition.
20. If Airbnb is unable to manage the risks presented by its business model internationally, its business, results of operations, and financial condition would be materially adversely affected.
21. Airbnb tracks certain operational metrics, which are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm its reputation and materially adversely affect its stock price, business, results of operations, and financial condition.
22. Airbnb's efforts to create new offerings and initiatives are costly, and if Airbnb is unable to successfully pursue such offerings and initiatives, Airbnb may fail to grow, and its business, results of operations, and financial condition would be materially adversely affected.
23. If Airbnb fails to comply with federal, state, and foreign laws relating to privacy and data protection, Airbnb may face potentially significant liability, negative publicity, an erosion of trust, and increased regulation and could materially adversely affect its business, results of operations, and financial condition.
24. If Airbnb fails to prevent data security breaches, there may be damage to its brand and reputation, material financial penalties, and legal liability, along with a decline in use of its platform, which would materially adversely affect its business, results of operations, and financial condition.
25. Airbnb's platform is highly complex, and any undetected errors could materially adversely affect its business, results of operations, and financial condition.
26. System capacity constraints, system or operational failures, or denial-of-service or other attacks could materially adversely affect its business, results of operations, and financial condition.
27. Uncertainty in the application of taxes to its hosts, guests, or platform could increase its tax liabilities and may discourage Hosts and guests from conducting business on its platform.
28. Airbnb faces possible risks associated with natural disasters and extreme weather events (the frequency and severity of which may be impacted by climate change),which may include more frequent or severe storms, extreme temperatures and ambient temperature increases, hurricanes, flooding, rising sea levels, shortages of water, droughts and wildfires, any of which could have a material adverse effect on its business, results of operations, and financial condition.
29. Airbnb may experience significant fluctuations in its results of operations, which make it difficult to forecast its future results.
30. Airbnb currently relies on a number of third-party service providers to host and deliver a significant portion of its platform and services, and any interruptions or delays in services from these third parties could impair the delivery of its platform and services, and its business, results of operations, and financial condition could be materially adversely affected.
31. Airbnb may raise additional capital in the future or otherwise issue equity, which could have a dilutive effect on existing stockholders and adversely affect the market price of its common stock. If Airbnb requires additional funding to support its business, this additional funding may not be available on reasonable terms, or at all.
32. The coverage afforded under its insurance policies may be inadequate for the needs of its business or its third-party insurers may be unable or unwilling to meet its coverage requirements, which could materially adversely affect its business, results of operations, and financial condition.
33. Its community support function is critical to the success of its platform, and any failure to provide high-quality service could affect its ability to retain its existing hosts and guests and attract new ones.
34. A significant portion of its bookings and revenue are denominated in foreign currencies, and its financial results are exposed to changes in foreign exchange rates.
35. The value of its equity investments in private companies could decline, which could materially adversely affect its results of operations and financial condition.
36. Airbnb may have exposure to greater than anticipated income tax liabilities.
37. Changes in tax laws or tax rulings could materially affect its business, results of operations, and financial condition.
38. Its ability to use its net operating loss carry forwards and certain other tax attributes may be limited.
39. Its business depends on attracting and retaining capable management and employees, and the loss of any key personnel could materially adversely affect its business, results of operations, and financial condition.
40. Consumer use of devices and platforms other than desktop computers creates challenges. If Airbnb is unable to operate effectively on these platforms, its business, results of operations, and financial condition could be materially adversely affected.
41. If Airbnb is unable to adapt to changes in technology and the evolving demands of Hosts and guests, its business, results of operations, and financial condition could be materially adversely affected.
42. Airbnb is subject to payment-related fraud and an increase in or failure to deal effectively with fraud, fraudulent activities, fictitious transactions, or illegal transactions would materially adversely affect its business, results of operations, and financial condition.
43. Its payments operations are subject to extensive government regulation and oversight. Its failure to comply with extensive, complex, overlapping, and frequently changing laws, rules, regulations, policies, legal interpretations, and regulatory guidance could materially adversely affect its business, results of operations, and financial condition.
44. Airbnb is subject to governmental economic and trade sanctions laws and regulations that limit the scope of its offering. Additionally, failure to comply with applicable economic and trade sanctions laws and regulations could subject us to liability and negatively affect its business, results of operations and financial condition.
45. Airbnb is subject to payment network rules and any material modification of its payment card acceptance privileges could have a material adverse effect on its business, results of operations, and financial condition.
46. Airbnb relies on third-party payment service providers to process payments made by guests and payments made to Hosts on its platform. If these third-party payment service providers become unavailable or Airbnb is subject to increased fees, its business, results of operations, and financial condition could be materially adversely affected.
47. Its failure to properly manage funds held on behalf of customers could materially adversely affect its business, results of operations, and financial condition.
48. If one or more of its counterparty financial institutions default on their financial or performance obligations to us or fail, Airbnb may incur significant losses or be unable to process payment transactions.
49. The failure to successfully execute and integrate acquisitions could materially adversely affect its business, results of operations, and financial condition.
50. Because Airbnb recognises revenue upon check-in and not at booking, upticks or downturns in bookings are not immediately reflected in its results of operations.
51. If Airbnb does not adequately protect its intellectual property and its data, its business, results of operations, and financial condition could be materially adversely affected.
52. Airbnb has been, and may in the future be, subject to claims that Airbnb or others violated certain third-party intellectual property rights, which, even where meritless, can be costly to defend and could materially adversely affect its business, results of operations, and financial condition.
53. Its use of “open source” software could adversely affect its ability to offer its platform and services and subject us to costly litigation and other disputes.
54. Airbnb has operations in countries known to experience high levels of corruption and any violation of anti-corruption laws could subject us to penalties and other adverse consequences.
55. Its focus on the long-term best interests of its company and its consideration of all of its stakeholders, including its hosts, guests, the communities in which Airbnb operates, employees, shareholders and other stakeholders that Airbnb may identify from time to time, may conflict with short- or medium-term financial interests and business performance, which may negatively impact the value of its Class A common stock.

Risks Related to ownership of the company's Class A Common Stock

1. Its share price may be volatile, and the value of its Class A common stock may decline.
2. The multi-series structure of its common stock has the effect of concentrating voting control with certain holders of its common stock, including its directors, executive officers, and 5% stockholders, and their respective affiliates, who held in the aggregate 86.3% of the voting power of its capital stock as of December 31, 2021. This ownership will limit or preclude other stockholders’ ability to influence corporate matters, including the election of directors, amendments of its organizational documents, and any merger, consolidation, sale of all or substantially all of its assets, or other major corporate transaction requiring stockholder approval.
3. Airbnb cannot predict the effect its multi-series structure may have on the market price of its Class A common stock.
4. Future sales of its common stock in the public market could cause its share price to fall.
5. Under its restated certificate of incorporation, Airbnb is authorized to issue 2,000,000,000 shares of Class C common stock. Any future issuance of Class C common stock may have the effect of further concentrating voting control in its Class B common stock, including the Class B common stock held by its founders, and may discourage potential acquisitions of its business and could have an adverse effect on the trading price of its Class A common stock.
6. If securities or industry analysts do not publish research or publish unfavourable research about its business, its stock price and trading volume could decline.
7. Future sales and issuances of its Class A common stock or rights to purchase its Class A common stock, including pursuant to its equity incentive plans, or other equity securities or securities convertible into its Class A common stock, could result in additional dilution of the percentage ownership of its stockholders and could cause the stock price of its Class A common stock to decline.
8. Airbnb does not intend to pay dividends for the foreseeable future. Consequently, any gains from an investment in its Class A common stock will likely depend on whether the price of its Class A common stock increases.
9. Anti-takeover provisions contained in its restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
10. Claims for indemnification by its directors and officers may reduce its available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.
11. Its restated certificate of incorporation and amended and restated bylaws provide for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and its stockholders, and that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act of 1933.

General risk factors

1. The value of its marketable securities could decline, which could adversely affect its results of operations and financial condition.
2. Airbnb incurs significant expenses as a result of being a public company, which could materially adversely affect its business, results of operations, and financial condition.
3. As a public reporting company, Airbnb is subject to rules and regulations established by the SEC and Nasdaq regarding its internal control over financial reporting. Airbnb may not complete needed improvements to its internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in the company and, as a result, the value of its Class A common stock and your investment.
4. The failure to successfully implement and maintain accounting systems could materially adversely impact its business, results of operations, and financial condition.
5. Airbnb's results of operations and financial condition could be materially adversely affected by changes in accounting principles.
6. Avoiding regulation under the Investment Company Act may adversely affect its operations.

Valuation

What's the expected return of an investment in the company?

Based on Airbnb capturing a 10% market share of its total addressable market and a number of other assumptions (the assumptions can be found in the table below), the expected return of an investment in the company over the next five years is 72%. In other words, an £1,000 investment in the company is expected to return £1,720 in five years time.

Assuming that a suitable return level over five years is 10% per year and Airbnb achieves its expected return level (of 72%), then an investment in the company is considered to be a 'suitable' one.

What are the assumptions used to estimate the return?

Key inputs

Description	Value	Commentary
Which valuation model do you want to use?	Discounted cash flow	There are two main approaches to estimate the value of an investment: By calculating the present value of the investment's expected future cash flows (i.e. discounted cash flow valuation); and By comparing the investment to other similar investments (i.e. relative valuation). Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report). Airbnb has never paid cash dividends, and on 7th February 2022, it said that it currently does not anticipate paying any cash dividends in the foreseeable future. Accordingly, Stockhub suggests using the free cash flow valuation method (rather than the dividend discount model).
Which financial forecasts to use?	Stockhub	The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by the Stockhub company (the forecasts can be found in the financials section of this report), so Stockhub suggests using those.
Growth stage 2
Discount rate (%)	8%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 100%.
Growth stage 3
Discount rate (%)	8%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 3) is 100%.
Growth stage 4
Discount rate (%)	8%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 4) is 100%.
Other key inputs
What's the current value of the company?	$728.88 billion	As at 5th June 2022, the current value of the Airbnb company is $728.88 billion.
Which time period do you want to use to estimate the expected return?	Between now and five years time	Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.

Sensitive analysis

The main inputs that result in the greatest change in the expected return of the Airbnb investment are, in order of importance (from highest to lowest):

1. The size of the total addressable market (the default size is $3.0 trillion);
2. Airbnb peak market share (the default share is 10%); and
3. The discount rate (the default time-weighted average rate is 8%).

The impact of a 50% change in those main inputs to the expected return of the Airbnb investment is shown in the table below.

Airbnb investment expected return sensitive analysis

Main input	50% worse	Unchanged	50% better
The size of the total addressable market	(14%)	72%	158%
Airbnb peak market share	(14%)	72%	158%
The discount rate	30%	72%	136%

Actions

To invest in Airbnb, click here.

To contact Airbnb, click here.

Appendix

Goldman Sachs' $143 price target (12-month) is based on 16x 2022E EV/Sales, or approximately 3x the online travel agents average of 5x, in line with Airbnb’s 3x faster growth rate that Goldman Sachs Investment Research estimates over the ’19-’24E period attempting to normalize for the distortion of the pandemic. In addition, Goldman Sachs Investment Research's 16x 2022E EV/Sales implies nearly 50x Discounted 2028E EBITDA (Exhibit 23) on a 55% 3yr CAGR (2022-’25E) which is roughly in-line with historical growth-adjusted EBITDA valuation across the Internet sector where EV/EBITDA/growth has trended around 0.8-0.9x.