Assessing Airbnb’s (ABNB) Post-IPO Valuation

After netting one of the biggest first-day rallies on record, rising 113% to reach valuation of more than $100 billion, shares of Airbnb (ABNB) pulled back on Friday by 3.77% to close at $139.25. But early-round investors aren’t complaining. Among technology company IPOs, only Alibaba (BABA) and Facebook (FB) have ended their first day of trading with a higher valuation…

Friday’s closing price for ABNB stock still represents a rise of 104%, more-than doubling the $68 per share the home rental juggernaut was priced for. The stock soared as soon as trading began, reaching a high of $165, driven by more-than-expected demand. Questions about Airbnb’s valuation and, for that matter, the valuation of other newly-minted public companies such as DoorDash (DASH), have sparked debates about the level of rationality being applied to the market.

On a year-to-date basis, when assessing the performance of IPOs, an estimated $160 billion has been raised on U. S. exchanges, according to Dealogic data. For some context, that number far exceeds the previous full-year record reached at the height of the dot-com boom in 1999. For Airbnb, based on its outstanding shares, it is now the world’s largest online travel company by market value, well above Expedia (EXPE) and TripAdvisor (TRIP).

Airbnb’s stock now trades higher than those of the four largest hotel chains combined — a list that includes leading brands such as Hyatt Hotels (H), Hilton Hotels (HLT) and Marriott (MAR).

“I don’t know what else to say,” Airbnb CEO Brian Chesky said, when the market bid for the stock approached $140 per share. “I’m very humbled by it.”

That surge of demand for ABNB stock demonstrates the type of potential investors believe Airbnb has. The question now is whether the valuation is justified, with the stock trading at roughly 20 times 2021 revenue. That is three times higher than Booking.com (BKNG).

While there might be concerns about “rational buying,” in the case of Airbnb, it says a lot that the stock closed more than 15% off Thursday’s highs. That said, there are several metrics and potential scenarios that suggest Airbnb stock may yet be undervalued. In fiscal 2019, the company generated Gross Booking Value of $38 billion, a 30% year-over-year rise. Airbnb, which attributed the tremendous growth to its investments, has also…

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