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A secular revenue growth puppy

Time for a futuristic idea – why? In the spirit of Barney The Purple Dinosaur From Our Imagination, I love you, you love me, we are happy family – as long as we keep a safe digital distance from each other. So here goes with an idea du jour.

Airbnb (ABNB) has tanked from 156 to 137 in the last two weeks, yikes. Yet the trends since the March quarter have only gotten better. I hear half of America and other rich countries are itching to go to the beaches of France, Spain, Italy, Greece and Baluchistan (this is a joke, but I am sure they have lovely beaches though only suitable for ladies who wear burkas on their burkinis).

Europe is 45% of booked nights on ABNB. So Mr. Market, as usual has go it dead wrong and this is an opportunity for an innocent little lamb like moi. The hybrid work model and Digital Age gives professional investors like me and executives in many other knowledge industries the freedom to work from wherever they want and take more frequent vacations.

For instance, I would love to work from my Gallic brother Raphael’s 600 year old Gascon family chateau, even though I will have to let the ghosts of his ancestors know that he is working for a bank that financed France’s glorious victory at the battle of Waterloo (it was a damn close call as His Grace the Duke of Wellington put it). Yet if the French can name railway stations after Austerlitz and Sedan (quelle horreur!), surely the Brits are entitled to Waterloo and Dunkirk. The moral of the story is that macro trends are aligned to nudge ABNB higher but it has fallen. Voila!

The Street consensus is for Q2 revenue to rise to $1.23 billion. Yummy. This is what I call a secular revenue growth puppy with a killer global brand that will turn profitable next year. Airbnb has also survived what my friend Gina Sanchez calls the mother of all stress tests – the COVID-19 pandemic. It has lagged the S&P 500 index by a horrific 15 points in 2021.

ABNB dominates the $150 billion alt accommodation booking market and I see no reason why it cannot deliver 30% revenue CAGR for the next five years. Expensive? Sure. When was the last time you bought Amazon at a PE of 20? Yet it has done quite well since I first recommended it in my Khaleej Times column on the day of its IPO on May 15th 1997. As a special property Hammour Kabir in Dubai knows, we bought this puppy on the IPO and tripled our money before I advised him to sell sometime in 1998. How little did I know what the future held for us all then? So do not be Harry hindsight and remember that the stock market discounts the future, not extrapolates the recent past.

My call? ABNB can be 3X in the next 5 years but the kingdom of heaven belongs to the patient, especially now that Baldwin is no longer king of Jerusalem, despite the best efforts of Raphael’s Crusader era ancestors. So my advice to my Gascon brothers! History proves that you can cook a lot better than you can fight!

Vive le fromage.

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