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Market Views

Why investing in Airbnb might be worth it

Nairametrics reviews the fast-growing startup, Airbnb amid concerns it has regulatory and competitive risks.

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Airbnb plans $30 billion IPO valuation

Airbnb, the biggest and most popular vacation online rental marketplace, known for disrupting the hospitality industry, is preparing for its initial public offer in the coming days as the long-awaited listing would be on the Nasdaq under the ticker symbol ‘ABNB’.

Airbnb has become a household name amongst millennials and a growing middle-class population as it has changed the hold big hotel businesses had on the accommodation industry, leading hotels to reform their business strategies.

Nairametrics decided to review the fast-growing start-up amid concerns it had regulatory and competitive risks.

Though Airbnb’s seeming entry into the public market looks new, the business has built a consistent pathway of generating impressive revenue, that its closest rivals (Bookings, Expedia) would turn green at.

  • Last year alone, Airbnb’s gross bookings earnings of $38 billion were 35% that of Expedia and 39% of Booking Holdings Inc, and its kept the momentum fired up, that it closed it amazingly to 62% and 64%, respectively, when taking to account the recent year to date periodicity.

Airbnb on its retention recipe

Some stock experts have been wary of such performance reoccurring amid the bias that the COVID-19 pandemic has slowed the movements of business travelers’ from one point to another, still Airbnb believes it has the retention recipe in keeping its customers on its platform.

“69% of our revenue in 2019 was generated from stays in that year by repeat guests, defined as guests with at least one prior booking, up from 66% in 2018 and 62% in 2017,” the company said in its S-1 filed earlier this week.

“We believe the guest revenue retention of our community is higher than the customer retention of OTA distribution platforms in the United States, based on available third-party credit card data.”

Still, a significant number of stock analysts seem to be excited about Airbnb, evolving its business model around cryptocurrency and blockchain technologies, on the bias that the company has deemed such platforms as integral to its future success.

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Airbnb on the role of emerging technologies

In its recently released prospectus filed to the US Securities and Exchange Commission (SEC) for its long-awaited IPO, the company gave an in-depth insight on the role cryptos, blockchain will play.

“Our future success will also depend on our ability to adapt to emerging technologies such as tokenization, cryptocurrencies, new authentication technologies, such as biometrics, distributed ledger and blockchain technologies, artificial intelligence, virtual and augmented reality, and cloud technologies.

“As a result, we intend to continue to spend significant resources maintaining, developing, and enhancing our technologies and platform.”

A key advantage sighted in Airbnb’s business model, similar to what is seen in Google is that most of its customers’ on Airbnb’s platform enjoy the user experience and amazing brand synergy, leading many to believe the largest online home rental company doesn’t need a huge advertising budget to succeed, taking into consideration that its brand loyalty does the heavy burden of marketing and generating loads of direct traffic.

Airbnb on future revenue

Airbnb in its recent filing acknowledged the huge challenge the tourism, hospitality sectors face in overcoming COVID-19. It says:

Our future revenue growth depends on the growth of supply and demand for listings on our platform, and our business is affected by general economic and business conditions worldwide, as well as trends in the global travel and hospitality industries.” 

Not forgetting the significant regulatory risk to the online vacation company faces, on the bias that some large cities around the world, have recently embraced curbs on short-term vacation rentals.

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What you should know about Airbnb

  • Airbnb is an online marketplace that allows individuals to let out their apartments or spare rooms to intended guests, at prices often lower than hotels.
  • Airbnb makes a cut of 3% commission of every booking from those individuals listing their apartments on Airbnb’s platform, and between 6% and 12% from guests that book via its platform.
  • Airbnb estimated at over $35 billion valuations, but it’s within the striking distance of a leading hospitality brand, Marriott International Inc, valued at $43 billion and about almost the same as Hilton Worldwide Holdings Inc.
  • Such valuation would come to question on the bias that the prevailing environment is looking inconducive for the hospitality business amid an era of COVID-19 and taking into account that the company is already feeling the pinch, as it cut 25% of its workforce, reduced salaries and marketing budgets, leading some analysts into curbing much room for its stock upsides when it goes public.

Bottom-line

Airbnb IPO would no doubt be one of the most important IPO debut this year, but its lasting role in the hospitality industry would be decided by its investors and how it handles the pandemic-stricken environment.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Message Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

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    Market Views

    US Stock markets unruffled about disappointing job report

    Wall Street was unshaken as it posted record gains at the end of the week despite a disappointing April job report.

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    Apple, Microsoft gain over 1%, propels Nasdaq up

    The April unemployment survey in the United States was a puzzler by most accounts. The 266,000 additional payrolls were the largest shortfall in economists’ estimates for nonfarm payrolls since the 1990s when many expected 1 million workers to be added to payrolls last month. However, Wall Street was unshaken as it posted record gains at the end of the week.

    While analysts warn that the figure is poor, considering how many people have fallen out of the workforce in the past year, the unemployment rate in April remained remarkably stable at 6.1 percent and the market maintained its bullish pace. The Dow Jones Industrial Average (+0.66%) and the S&P 500 index (+0.74%) posted record closes on Friday, as the weak jobs report affirmed views that the Federal Reserve will keep financial conditions easy for longer.

    Despite Friday’s gains, large-cap technology stocks are also lagging behind the overall market. For the year, Apple Inc (AAPL.O) is down almost 2%, Amazon.com Inc (AMZN.O) is up less than 2%, and Netflix Inc (NFLX.O) is down 6.5 percent. Overall, the technology market is up 6.8% year to date, less than half of the S&P 500’s 12.6 percent increase (.SPX).

    READ: China, US confirm global recovery, capital market stocks are nearing all-time high

    Furthermore, value stocks in cyclical sectors like financials, oil, and consumer sectors are soaring. The Russell 1000 Value index (.RLV) has gained 18 percent this year, including 0.7 percent on Friday, while the Russell 1000 Growth index (.RLG) has gained 6.3 percent this year, including 0.6 percent on Friday.

    Although some technology stocks rose on Friday after a lacklustre U.S. unemployment report, some portfolio managers believe that recent blowout profits from many major technology firms are insufficient to justify continuing to make large bets on the industry.

    The 266,000 new jobs added in April was a significant decrease from the 770,000 new jobs added in March. The rise in April was fueled by employment growth in the leisure and hospitality sector, which gained 330,000 jobs, with more than half of those in restaurants and bars. Overall, the industry employs 2.8 million fewer people than it did prior to the pandemic.

    Wide losses in temporary support providers and couriers and messaging services, as well as smaller drops in manufacturing and retail, reversed those gains. Construction employment remained largely stable.

    Because of the high liquidity created by the stimulus package and the FED’s decision to keep rates unchanged, the stock market appears to be immune for the time being. The biggest issue on most people’s mind is how long this positive mood will last in the economy.

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    Market Views

    Top 10 Stockbroking firms in Nigeria for April 2021

    The top ten Stockbrokers traded shares worth N111.8 billion in April 2021, accounting for 69.9% of the total amount of shares traded.

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    Governor Fayemi explores investment options with the capital market, Nigerian Stock Exchange, Top 10 stockbrokers trade N120.4 billion worth of stocks in November , Law Union & Rock Insurance Plc Announces Notice of Board Meeting and Closed Period, NSE Hosts First Virtual Automated Trading System (ATS) Broker Certification Training Programme, Steroids from GTBANK, ZENITH Lift Nigerian bourse, as investors gain N94.2 billion, Nigerian bourse close flat, triggered by low market liquidity, Industrial index down by 5.7%, as shares of BUA, Lafarge, Dangote, others decline on NSE

    The Nigerian Stock market ended the month of March 2021 bullish as the All-Share Index grew by 2.02% from 39,045.13 points recorded as of March 31st, 2021 to close at 39,834.42 points at the end of April 2021.

    Meanwhile, the top-performing stockbroking firms in the Nigerian Exchange Group (NGX) traded about 4.89 billion units of shares with a value of N111.8 billion, accounting for 69.9% of the total value of shares traded in the month.

    This is according to the Broker performance Report, released by the Nigerian Stock Exchange for the month of April 2021.

    According to the report, Morgan Capital Securities led the list of stockbroking firms by volume of shares while Investment One Stockbrokers traded the highest in monetary terms for the period under review.

    READ: NSE-30 companies lose N1.13 trillion in market capitalisation year-to-date


    Stockbrokers by value

    The top ten Stockbrokers were responsible for 69.9% of the total amount of shares traded in April 2021, trading a total of N111.8 billion worth of shares.

    • Investment One Stockbrokers toppled Stanbic IBTC to top the list with trades valued at N60.91 billion in April 2021, representing 38.08% of the total value of shares traded during this period.
    • Rencap Securities stood at second on the list with trades in stocks valued at N15.59 billion, accounting for 9.75% of the total value of shares traded in the month of April.
    • Cardinalstone Securities followed with its total trades valued at N8.45 billion in the period under review. This represents 5.28% of the total value recorded in the Stock Exchange market.
    • EFG Hermes also traded in stocks worth N7.05 billion, to stand fourth on the list as it accounted for 4.41% of the recorded trades in monetary value.
    • Stanbic IBTC Stockbrokers traded a sum of N4.1 billion worth of stocks, which accounted for 2.57% of the total value for the period.
    • Others include Meristem Stockbrokers (N3.87 billion), Chapel Hill Denham (N3.66 billion), Stonex Financial (N3.36 billion), CSL Stockbrokers (N2.53 billion), and Cordros Securities (N2.27 billion).

    READ: REVEALED: Three reasons the NSE expelled 38 stockbroking firms in six months


    Stockbrokers by volume

    The top ten stockbroking firms for the period under review traded in 4.89 billion units of shares, accounting for 45.01% of the total traded stocks.

    • Morgan Capital Securities tops the list of stockbroking firms in terms of volume of shares traded as it recorded trades in 859.82 million units of shares, representing 7.91% of the total volume traded in the bourse for the period.
    • Cardinal Securities followed, having traded in 835.49 million shares, accounting for 7.69% of the total volume of shares traded in April 2021.
    • Investment One Stockbrokers traded in 566.53 million units of shares in the month under review. This represents 5.21% of the total recorded.
    • Meristem Stockbrokers Limited stands fourth on the list with trades in 564.54 million units of shares in April 2021, accounting for 5.19% of the total volume recorded.
    • FBN Quest Securities traded in a total of 449.25 million units of shares accounting for 4.13% of the total volume recorded in the period under review.
    • Others on the list include EFG Hermes (422.23 million), Rencap Securities (406.6 million), Falcon Securities (312.13 million), Stanbic IBTC (248.43 million), and APT Securities (226.28 million).

    What you should know

    • The NSE ASI grew by 2.02% in the month of April 2021, bringing the year-to-date performance to a decline of 1.08%.
    • The NSE Banking Index however dipped by 4.76% in the month of April to close at 352.07 points, while the year-to-date growth stood at -10.42%
    • NSE Industrial Goods index grew by 3.06% in the review period.

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