Most sectors look forward to departing this pandemic year. But the travel industry has particular reason to cheer. News of the imminent arrival of a Covid-19 vaccine has encouraged hopes of a revival in domestic and international trips. That has led to renewed interest in travel website companies.
Share prices of online travel websites Expedia and Booking.com have recovered to pre-pandemic levels. Still, dreaming about a holiday is not the same as taking one. Investors should keep that in mind when judging the pricing details of Airbnb’s initial public offering.
The home-sharing pioneer announced on Tuesday that it plans to sell as many as 55m shares at between $44 and $50 apiece. It could raise as much as $2.75bn. That would value the company at $29.8bn. On a fully diluted basis — including employee stock options and restricted share units — Airbnb would be valued at about $33bn.
That is below the valuation hoped for a year ago — but above the theoretical value of just $18bn that Airbnb agreed to in a private funding round in April following a collapse in bookings.
Bookings in 2020 have been a shade of pre-pandemic times. Net losses more than doubled to $697m during the first nine months of the year as revenue fell by a third to $2.5bn. With a second wave forcing lockdowns in much of Europe, and possibly the US, Airbnb should not expect the final quarter to improve much. That puts the IPO valuation on as much as 7.5 times this year’s expected sales of some $4bn — higher than Expedia at closer to 3 times.
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As with Expedia, a bet on Airbnb is a punt on post-pandemic travel prospects. But online booking groups have some advantages over other segments of the global travel industry such as airlines or cruise operators. The former generally have fewer assets on their balance sheets.
Having survived the worst of the pandemic, Airbnb and Expedia should be able to soldier on until the globetrotters return in force.
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