Airbnb stock falls after downgrade—analyst says it’s Expedia’s year

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According to one analyst, the prospect of a broader recovery for the travel sector could favor Expedia Group Inc. and make Airbnb Inc.’s alternative accommodation business relatively less attractive.

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Piper Sandler’s Thomas Champion Upgrades Expedia’s Stock EXPE,
-0.84%
Airbnb stock downgraded to ABNB, weighing more than neutral Monday,
-5.06%
From overweight to neutral. Airbnb shares are down 6.2% in trading Monday. Shares of Expedia are up 1.6%.

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Although the Omicron version has raised concerns, Champion is not too concerned about the travel sector, saying that “a methodical (if non-linear) travel recovery is underway.” Travelers have “increasedly ‘fainted’ under virus headlines that suggest an entry into a pandemic versus a pandemic phase,” he continued.

Champion particularly likes Expedia’s position: The company has made encouraging changes to its cost structure and bookings could be “positively impacted” during the first quarter.

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From a stock perspective, Champion wrote that Expedia has an “unwelcome valuation” relative to its online-travel peers. By being more sensitive to investor valuations, Expedia could prove to be “compelling” as it trades at a discount to its peers while taking advantage of similar recovery trends.

While Airbnb’s “pure-game” focus on alternative accommodation was beneficial earlier in the pandemic, it may be less attractive “in an environment where customers are interested in a diverse range of travel services that include airfare, traditional accommodation and other activities.” Maybe,” wrote Champion.

He also sees Airbnb’s valuation as “expanding.” Booking Holding Inc. The stock trades at 12 times the estimated enterprise value of 2023 sales, compared to 5 times for BKNG,
-0.97%
And 2 times for Expedia.

“In our view, this premium is more difficult to justify on a growth basis,” he wrote, because Airbnb’s three-year “recovery trajectory doesn’t look as different” to what other online-travel companies might look to.

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