I am assigning Airbnb (NASDAQ: ABNB) a negative risk/reward rating based on its elevated valuation, rapidly decelerating revenue growth, and the downside asymmetry of its expected return profile. That being said, Airbnb is arguably the most dynamic investment opportunity in the travel and lodging industry. This should garner it a position on the watchlist of all growth stock investors.
Airbnb’s dynamic growth potential is complimented by the strong free cash flow generation capabilities embedded in its business model. The company’s cash flow potential is on full display through the first half of 2021 and is beginning to resemble that of past industry leaders such as Priceline, now part of Booking Holdings (NASDAQ: BKNG).
In this article I analyze Airbnb’s performance to date in order to uncover the primary trends in its business, before turning to the company’s valuation. The intent is to create a foundation on which an investment strategy for the shares may be built.
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