Airbnb stock has dazzled investors since its Nasdaq debut in December. From its initial public offering price of $68 per share, ABNB stock soared 223%, hitting an all-time high of 219.94 on Feb. 11.
Amid growing concern over how the delta variant of Covid-19 could affect people’s travel plans, Airbnb (ABNB) endured another steep slide in July. However, shares are moving bullishly again. ABNB stock enjoyed a solid gain in the third quarter, up 9.5%. And so far in October, the travel play has advanced another 3% through Wednesday.
Barron’s reported Tuesday that equity research analysts at Cowen bumped up their price target on ABNB shares by nearly 38%, to 220 from 160. The IBD sister publication noted that analyst Kevin Kopelman thinks Wall Street is being too conservative with its growth estimates for the megacap stock, which boasts a $109 billion market value.
Are Institutions Accumulating ABNB Stock?
On Aug. 24, shares ramped up 10% to a three-month high in blistering volume — a sign that institutional investors are possibly loading up on shares. Almost 21 million shares exchanged hands, more than triple its average turnover over the past 50 sessions.
That was one pivotal trading day.
ABNB shares, a member of the IBD Leaderboard portfolio, had already gained ground four weeks in a row before the company posted second-quarter results on Aug. 12. This marked the longest win streak since a six-week advance through the week ended Feb. 12.
The large-cap travel play rallied more than 4% in the week ended Aug. 6. That helped ABNB close above its 10-week moving average — drawn in red on IBD weekly stock charts — for the first time in four weeks. Despite steep losses in the final week of September, Airbnb continues to hold most of its big gains since late August. And October so far has seen continued bullish action.
So, is Airbnb stock a buy now?
This story analyzes all facets of the innovator in leisure travel in terms of fundamentals, technicals and mutual fund ownership. All of these elements get inputted into CAN SLIM, IBD’s research-driven seven-point paradigm for successful growth stock investing.
ABNB Stock: Why The Action In Q1 Proved Disappointing
Weak action replaced the uptrend, albeit a brief one, that began with a January breakout past a 175.07 proper buy point in a narrow, closet-width IPO base. But investors would rightly feel frustration over how ABNB stock made a full round trip of its gains.
Airbnb stock had locked current shareholders into a narrower trading range, between 130 and 155. No longer. Shares still trade more than 20% below the all-time high of 219.94. Yet a bottoming base has formed — good for bullish investors.
On another bullish technical note, ABNB has jumped back above the 21-day exponential moving average and the key 50-day line, which had been sliding since mid-April but now is rising nicely again. Definitely a bullish change in character. Plus, recent pullbacks have stopped short of sharply undercutting the 21-day line. Positive.
The 50-day moving average plots a stock’s average closing price over the 50 most recent trading sessions. You can set a 21-day exponential moving average on a daily chart at MarketSmith. The 10-week moving average, found only on a weekly chart, acts nearly in lock step with the 50-day line on the daily chart.
ABNB Analysis: Is Relative Strength On The Mend?
After months of sharp declines, Airbnb recently shows a rising Relative Strength Rating of 74 on a scale of 1 to 99. This means ABNB has now outperformed 74% of all companies in the IBD database. Good, but not great. Yet, that’s up sharply from a 25 RS Rating on Aug. 23.
The RS Rating covers 12-month relative price performance. Yet Airbnb has traded for only nine months since its December IPO. Nevertheless, you generally want to home in on companies that show an RS Rating of 85 or higher. Why? That way you’re selecting stocks already showing strength ahead of a potential breakout to new highs and a profitable price run.
An 85 Rating means a stock is already ranking in the top 15% in terms of stock price strength.
When it comes to picking high-flying growth stocks, those with superior price strength tend to make new highs, then keep going higher.
Also, the RS Rating places emphasis on the past three months of action. Since the start of Q2, ABNB stock in fact has fallen sharply. So that underwhelming performance also hurts its relative strength score.
Keep an eye on the Accumulation/Distribution Rating, too. Right now, Airbnb gets a positive B grade on a scale of A to E. This proprietary IBD rating measures the amount of heavy institutional buying vs. selling over the past three months. A grade of C+ or higher denotes net institutional buying over the past 13 weeks; C- or lower points to net selling.
If you want a stock that is eagerly getting scooped by mutual funds, banks, college endowments and the like, prefer those with an A or B grade before you buy.
The San Francisco-based firm’s disruptive business model: Allow house and condo owners turn their properties into short-term rentals. The idea has hatched plenty of competitors. Even large hotel chains offer similar properties in addition to their standard lodging accommodations. So, competition is truly fierce. Plus, coronavirus walloped the lodging industry in 2020. No wonder Airbnb’s revenue declined in three of its four quarters last year.
After a nominal pickup in the top line in the first quarter of 2020, Airbnb saw revenues fall 72%, 18% and 22% vs. year-ago levels in Q2, Q3 and Q4, respectively.
Over that same time frame, Airbnb lost a total $1.74 a share. The company has 618 million shares outstanding.
Will business improve in 2021?
Right now, Wall Street thinks Airbnb will keep bleeding red ink, but has trimmed the estimate to a loss of $1.33 a share in 2021. And the bottom-line consensus estimate for 2022 has turned from a net loss of 26 cents to earnings of 69 cents a share. Encouraging.
In the first quarter of 2021, San Francisco-based Airbnb reported revenue of $887 million, up 5% vs. a year ago; that marked a four-quarter slump of top-line growth and pounded the FactSet consensus view. The company also noted a 13% year-over-year rise in “nights and experiences booked” to 64.4 million. It recorded a net loss of $1.17 billion (-$1.95 a share) vs. a net loss of $341 million in Q1 of 2020 (-$1.30 per share). Wall Street expected the company to lose $1.19 a share and post $714 million in sales, down 15% vs. a year earlier.
For now, Airbnb’s 20 Earnings Per Share Rating means its profit record in the near and long term is superior to only 20% of all publicly traded companies. In most cases, you’d prefer companies with an EPS score of 80 or higher. The SMR Rating, analyzing sales, profit margins and return on equity, moved up to a D grade, but that’s still dismal on a scale of A to E.
The I In CAN SLIM: Institutional Ownership
Fortunately, mutual funds are accumulating ABNB stock.
MarketSmith data shows the total number of mutual funds owning a piece of Airbnb has now hit a record 1,003 funds at the end of the third quarter, up sharply from 665 in Q4 2020. Top funds holding a stake include Janus Henderson Enterprise Fund (JANEX), Franklin Growth (FKGRX), MFS Growth (MFEGX) and the A+ rated Artisan Developing World Investors (ARTYX). ABNB makes up more than 3% of Artisan’s fund assets.
Management owns 1% of Airbnb stock. The float, at 189 million shares, is rising. Yet, this float poses just a fraction of the 608.4 million shares outstanding. So, individual investors should prepare for secondary offerings of closely held shares that could hit the stock in the future.
Potential Buy Point In Airbnb Stock?
The handle represents a final shakeout of uncommitted holders ahead of a potential new breakout and a timely new buy opportunity. It formed as the stock tested buying support at the 21-day exponential moving average and the 50-day line.
In essence, ABNB offered a buy opportunity for those who are willing to accept higher-than-normal risk. Why? Plenty of investors who bought at much higher price levels and held on to their losing positions may come out of the woodwork, eager to sell their shares to cut losses or get out and break even.
Anxious, disgruntled holders who had bought at 160, 170, 180 or higher create a potential overhead supply of heavy selling.
Nonetheless, ABNB’s breakout rally continues to gain traction.
The 5% buy zone from 152.86 goes up to 160.50. So, during a recent drop to a session low of 159.45, ABNB shares briefly came back into the proper buy area. But in a dramatic reversal, the stock has gained more than 5% last week to exit that buy zone.
Please avoid buying shares far above the 5% zone. After a hot run, a stock can temporarily pull back and shake out new investors who follow the rule of cutting losses short.
In the meantime, a new handle has formed.
This indeed could offer a new entry point at 177.06. Why? ABNB is still well below the highs within its larger cup structure. Remember, ABNB had peaked all the way back in February near 220.
Why Buy At The Correct Entry?
William O’Neil, founder of Investor’s Business Daily, discovered during decades of research that the biggest stock market winners rarely fall more than 7% to 8% below a proper buy point. So, it was totally reasonable to expect Airbnb stock at some point to come back to or near the 152-to-155 price level. If the stock rallied to, say, 175, then fell back to 155, that’s an 11% retreat. But ABNB would still be holding above the 152.86 entry.
Success in fast-moving growth stocks depends in large part on buying as close as possible to the breakout point.
Finally, ABNB stock edged over a trend line starting from the March 22 high at 203. Trend-line breakouts offer aggressive entries for investors who have experience with the CAN SLIM investing system. In the case of Airbnb stock, an early buy point emerged just above 150.
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