The trend is clearly up in this hospitality stock, with institutional investors like mutual funds, jumping back into the shares after the breakdown due to COVID.
Airbnb, Inc. (ABNB)
From Ian Wyatt, Ian Wyatt’s Million Dollar Portfolio
This morning, Airbnb made a huge announcement. The company stated that it would look to provide housing for 20,000 Afghan refugees. Simply put, Airbnb will work with hosts to pay for housing costs. It won’t cost refugees or hosts a dime. The end date on the plan isn’t known yet. It could be a few months. It may end up being a few years.
Estimates are that there may be as many as 2.5 million refugees. So, while it’s a small humanitarian gesture, one odd thing is happening. Shares are rallying. They’re up about 9% in afternoon trading. In theory, that doesn’t make sense. This is a big potential giveaway by the company on paper. It will impact the company’s earnings in the short-term.
But I think there are a few reasons for this rally, and why it makes sense.
First, Airbnb has created a hub with millions of potential users and hosts. While 20,000 may sound like a lot, it really isn’t compared to its whole universe of potential users.
Second, with Covid still impacting global travel, there are likely a lot of potential Airbnb hosts who don’t want to have guests for a few nights, or at all. Or there may be local restrictions on such travel that doesn’t apply to refugees. But those hosts might open up a spare room or guest house for a few months for a person or family who needs it now. That’s especially true with Airbnb footing the bill.
Finally, things will change in time. Refugees will find permanent homes (whether in their original country or a new one).
The goodwill that Airbnb is earning from its move today will be remembered by millions for years to come. And anyone who hosts will likely be proud of their role in helping make the world a little less horrific for those who have come from such an extreme.
So, while this move may impact some profitability in the short-run, it’s setting the company up to be a more valuable brand over time. That’s what we want to see in an industry dominator.
These kinds of moves are sometimes derided as a gimmick, or some act of “woke capitalism.” But over the years, many companies, particularly in tech, have shifted from maximizing profitability towards looking at a bigger picture beyond a company’s bottom line.
And, of course, there’s no better way to showcase the power of capitalism than to see how quickly a private sector company can mobilize 20,000 housing units. I’d put Airbnb up against a government agency to get the job done quickly and within a budget any day. By having this broader focus, these dominators have found that the returns truly take care of themselves.
Already, news of this program has saved Airbnb millions on advertising—and it’s just the first day. As long as the company can show that it can be done safely for all parties, it goes to show the power of the private sector.
While Airbnb is a relatively pricey stock as judged by its financial fundamentals, the truth is it’s probably about as affordable as it will ever be. While shares have popped higher today, they’re well under our maximum buy price of $215.
While buying shares won’t allow you to directly help out Afghan refugees, you’ll own a business that’s working to tackle some of the world’s most pressing and immediate issues, a fact that wasn’t on the radar back in February.
Recommended Action: Continue accumulating shares of Airbnb up to $215.
Ian Wyatt, Ian Wyatt’s Million Dollar Portfolio, wyattresearch.com, August 24, 2021