May was an eventful month for Airbnb (NASDAQ:ABNB) watchers. ABNB stock got off to a strong start early in May when the company delivered a first quarter earnings beat, with guidance for an even stronger Q2. That led to a nearly 8% pop for ABNB stock the next day. However, the good times didn’t last.
The next several weeks saw shares lose a quarter of their value. Among the concerns raised was a CNBC report that Airbnb is exiting the domestic Chinese market. After launching in China in 2016, news of the retreat from the world’s most populous country had many investors worried.
Airbnb is still somewhat risky, especially in the short term. The company continues to lose money, the war in Ukraine is hurting European travel, and the pandemic “recovery” remains rocky thanks to surging Covid-19 variants. Retreating from China is the least of the worries for Airbnb investors. However, over the long-term, the picture looks better for this company. That makes the current price of ABNB stock (roughly $13 off its all-time low close of $106.24) a potential buying opportunity for long-term growth investors.
Airbnb Exiting China Is Not a Big Cause for Concern
The headline is one that understandably raised the hackles of investors. China is the world’s largest country by population. With roughly 1.4 billion people it has over four times the population of the United States. Moreover, China’s citizens have been enjoying rapid income growth. According to the World Banks, China’s per capita income has grown at an average of 10% annually since 1978. That means a lot more people who are able to afford travel.
In comparison, U.S. GDP growth has been much more modest — under 5% per year since 2006, with two years in that period having negative GDP growth. It’s no wonder then that the idea of shutting down operations in China is causing some distress for ABNB investors.
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However, all is not as it seems. For one thing, trips taken within China account for just 1% of Airbnb’s revenue. That business is increasingly under pressure from Chinese competitors. And under the Chinese government’s zero Covid-19 policies, travel within China could see ongoing disruption. More importantly, Airbnb is continuing to book trips for China’s overseas travelers. As the population grows wealthier, travel outside of the country is aspirational and ABNB stock will still benefit from that international travel.
With Travel Resuming, Airbnb Could Be In a Perfect Position
What about the macroeconomic factors that have hammered the stock market this year? Won’t rising interest rates, inflation, sky-high gas prices and the possibility of recession hurt travel?
This is definitely a risk to be aware of. However, consider this. What if these factors drive travelers to look for ways to save money rather than eliminate their trips? In that scenario, Airbnb could do even better, at the expense of hotels.
Should You Buy ABNB Stock?
With ABNB stock currently discounted to near its all-time low price, is now the time to buy? That depends. In the short-term there’s a lot going on that could derail this Portfolio Grader “B” rated stock. There are big questions over economic conditions, war curtailing travel in Europe, and even Covid’s stubborn refusal to fade away.
However, for long-term growth investors, the picture looks rosier for Airbnb. Checking with the investment analysts tracked by CNN Money, the consensus rating is “hold.” However, with a median 12-month price target of $185 (representing 56% upside) there is some confidence that ABNB stock is going to rally eventually. If you’re willing to be patient, an ABNB investment is quite likely to pay off in the long term.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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