Is Airbnb Ready to Breakout? – October 20, 2021

Airbnb Inc. (ABNB) is the world’s largest online alternative accommodation travel agency, also offering booking services for boutique hotels and experiences. Listings from the company’s 4 million hosts are spread over 220 countries and 100,000 cities. Transaction fees for online bookings account for all its revenue.

The company had a solid second quarter where it beat expectations in both earnings and revenues. ABNB benefited from pent-up travel demand as people got vaccinated and many travel restrictions were lifted. The firm has also expanded into other hospitality options such as outdoor and nature activities.

ABNB also has a strong balance sheet. At the end of the second quarter, the company had $7.4 billion in cash on hand compared to no short-term debt. This led to a Quality Grade of B in our POWR Ratings system. Revenue is expected to rise 68.3% for the year, while earnings are forecasted to jump 91.2%.

However, the stock looks very overvalued with a forward P/E of 555.56. ABNB has shown bullish momentum since mid-July. This is evident in the chart below.

Take a look at the 1-year chart of ABNB below with the added notations:

While running up against a key level of resistance at $176 (red), ABNB has also started the makings of a support trendline (green). The stock just hit that resistance last week and might now be making another run at the trendline. At some point, either $176 or the trendline will break.

A long trade could be entered on a break above the resistance with a protective stop placed under the point of entry. However, if support were to break the trendline, a short trade could be entered as lower prices could follow.

ABNB shares were trading at $170.73 per share on Wednesday morning, down $0.01 (-0.01%). Year-to-date, ABNB has gained 16.30%, versus a 21.70% rise in the benchmark S&P 500 index during the same period.

Author: Christian Tharp