Is it a purchase? Here’s what fundamentals, ABNB stock chart action suggest

Airbnb stock has both dazzled and intrigued growth stock investors since its Nasdaq debut in December 2020. From its initial public offering price of $68 per share, ABNB stock has soared to 223%, reaching an all-time high of 219.94 on February 22. 11, 2021.




X



In 2021, the travel industry faced the challenge posed by multiple strains of Covid-19, including the delta and omicron variants. But 2022 is another story; known cases of Covid-19 have fallen sharply in the United States and Europe. More and more countries are easing or ending quarantine requirements for incoming travellers. Less testing is needed.

More and more business travelers, meanwhile, say they feel more comfortable getting back on the plane. And a new survey in March by Morning Consult, conducted on behalf of the American Hotel & Lodging Association (AHLA), reveals that sentiment is changing on the business travel front. The survey notes that 77% of business travelers and 64% of U.S. employees agree that “bringing business travel back is more important than ever.”

Airbnb Stock: Is it bouncing back for real this time?

In short, this is good news. Airbnb (ABNB), whose shares posted a fourth consecutive week of gains and ended the week less than 19% from a 52-week high.

So, is Airbnb stock a buy now? Or is it time to lock in profits and sell?

This story analyzes all facets of the innovator in leisure travel in terms of fundamentals, techniques and mutual fund ownership. All of these elements are integrated into CAN SLIM, IBD’s seven-point, research-driven paradigm for successful investment in growth stocks.

Airbnb stock today

ABNB shares recouped most of their losses after a positive report in the fourth quarter. A highlight? Airbnb posted net income of 8 cents per share against a further loss of 58 cents in the coronavirus-plagued quarter of 2020. The positive earnings also crushed Wall Street’s view of 4 cents. Revenue rose 78% to $1.53 billion, following a 67% jump in the third quarter of 2021. Full-year revenue rose 77% to a record $5.99 billion. dollars.

In March, CFRA announced that it was keeping a price target of $215. The investment bank also raised its earnings estimate for fiscal 2022 to $1.33 per share from 76 cents and guidance for 2023 to $2.21 from $1.16. The Street’s current consensus forecast: $1.37 per share for 2022 vs. a net loss of 57 cents last year and $2.03 for 2023.

Obviously, ABNB remains in base building mode. And breaking back up above the 50-day moving average and the 200-day line are two recent milestones.

The moving average over 50 days retraces, on a daily chart, the evolution of the price of a share over the last 50 trading sessions. Before a potential breakout to new highs, you would like to see a growth stock break through its 50 and 200 day lines and pull them up.


Investor’s Corner: Three investment tips that have nothing to do with using charts


Attractive business model

The San Francisco-based company’s disruptive business model: enabling home and condo owners to turn their properties into short-term rentals. The idea hatched many competitors. Even major hotel chains offer similar properties in addition to their standard accommodations.

The company recorded 73.4 million total room nights and booked bookings in the fourth quarter of 2021, jumping 59% from a year ago. And gross booking value of $11.3 billion jumped 91%, up 93% excluding currency effects. Airbnb reported net income of $55 million, translating into an after-tax margin of 3.6%. Free cash flow reached $376 million.

During the February 23 episode of IBD Live on Zoom, Jason Thomson, portfolio manager at O’Neil Capital Management, noted that millennials’ desire to travel in large groups and the desire to make last-minute plans make the Airbnb offer particularly attractive. And this has not gone unnoticed by the major hotel chains.

Airbnb ended the year with $8.3 billion in cash, cash equivalents and marketable securities.

“We have millions of Airbnb hosts offering nearly every type of accommodation in nearly every community around the world,” the company wrote in a fourth quarter press release. Executives also noted that guests “discover thousands of small towns and rural communities on Airbnb” while returning to cities. Gross room nights booked in urban locations accelerated from Q3 and “nearly recovered to Q4 2019 levels.”

Total diluted shares outstanding 681 million shares at the end of the fourth quarter. MarketSmith data currently shows ABNB with 643 million shares outstanding.


Investor Corner: 7 mental tips for outperforming the S&P 500


ABNB Stock Analysis: Is relative strength on the mend?

Airbnb’s relative strength rating has risen to 76 on a scale of 1 to 99. This rating is still down from 90 a few months ago. Yet the RS rating means that ABNB now outperforms 76% of all companies in the IBD database over a 12 month period.

You generally want to focus on companies that have an RS rating of 85 or higher. Why? This way you are selecting stocks that are already strong before a potential breakout to new highs and a profitable price run.

A rating of 85 means a stock already ranks in the top 15% in terms of stock price strength. When it comes to choosing high-flying growth stocks, those with higher prices tend to reach new highs and then continue to rise.

Keep an eye on the accumulation/distribution rating. Currently, Airbnb earns a decent B rating on an A to E scale. This IBD-exclusive rating measures the amount of heavy institutional purchases versus sales over the past three months. A rating of C+ or higher indicates net institutional purchases over the past 13 weeks; a C- or lower indicates a net sale.

If you want a stock that is quickly picked up by mutual funds, banks, college endowments, etc., look for those with an A or B rating before you buy.

For now, Airbnb’s 73 earnings per share rating has improved significantly. This figure means that its short-term and long-term earnings record is more than 72% of all publicly traded companies. In most cases, you would prefer companies with an EPS score of 80 or higher. The SMR rating, analyzing sales, profit margins and return on equity, has risen to a D rating, but it’s still dismal on an A to E scale.

The I In CAN SLIM: Institutional Ownership

Fortunately, mutual funds continue to accumulate ABNB shares.

MarketSmith data shows the total number of mutual funds holding an Airbnb share hit a record 1,289 funds at the end of the fourth quarter, up from 664 in the fourth quarter of 2020. The top funds holding a stake are Janus Henderson Enterprise Fund (JANEX), PGIM Jennison Growth (PJFAX) and Artisan Developing World (ARTYX). ABNB represents 5.8% of the assets of Artisan Developing World.

Fidelity Contrafund (FCNTX), JPMorgan Large Cap Growth (SEEGX), Franklin Growth (FKGRX) and Wells Fargo Growth (SGRAX) – all members of the IBD Mutual Fund Index, also now have positions in the stock.

Management owns 1% of Airbnb shares. The float, now at 340 million shares according to MarketSmith, has increased sharply. The free float represents 54% of the 635 million shares in circulation. Thus, individual investors should be prepared for secondary offerings of restricted stocks that may hit the stock in the future.

Why the 2021 breakout failed

From September to October, a handful on ABNB’s deep cup model. This offered a suitable entry point at 177.06. What is a handle? Just a relatively calm pullback after a sharp drop in a stock’s price, then bouncing back near all-time highs. This latest jolt of disgruntled or uncommitted holders clears the decks for a potential first-class breakout.

On November 4, just before the third quarter results, ABNB shares moved past this aggressive entry. Then, on November 5, the stock recorded a bullish gap.

See also

This means that a good time to buy stocks was near 194, when Airbnb stock rallied sharply in the first five minutes of trading this session and then continued to break above the top of the first intraday trading bar. 5 minutes. Please read more about the technique of buying a breakout gap in this investors corner. Buying breakout spreads works best in a strong bull market, especially following a deep or long correction.

But the threat of the omicron variant of Covid-19 shook the world, and the stock fell sharply below 177.06 and 194 buy points. The negative reversal forced new buyers to sell stocks to limit losses.

Chart analysis today

For now, a 4-month deep cup pattern is emerging. It holds an entry point of 212.68, 10 cents above the top of the left cup.

A sharp sell-off in travel shares in late February threatened to send Airbnb stock to its lowest level since the company went public at $68 per share in December 2020. But a fresh rebound, coinciding with a daily follow 15 by the S&P 500 on March 16, offered a good reason to continue to watch ABNB closely.

In the meantime, a six-week handleless cup base has now emerged. The correction from the high to the low in this pattern: a much healthier 31% compared to the 38% decline in the base that began to form in November of last year.

Airbnb Stock Now: A New Base Within a Base

This smaller base is found in the larger deep cup model. Take the highest price on the left side of this cup of 191.73 and add 10 cents to get a buy point of 191.83.

Airbnb continues to close in on this entry. But at Friday’s close of 173, the stock still needs to rally at least 10% to clear the buy point of 191.83.

So for now, ABNB is not a buy.

Still, at some point, Airbnb could stage a strong breakout to 52-week highs. When this happens, always stay disciplined with post management; cut losses if the stock beats expectations. William O’Neil, founder of Investor’s Business Daily, has found through decades of research that the biggest stock market gainers rarely fall more than 7-8% below an appropriate buy point.

Please follow Chung on Twitter: @saitochung and @IBD_DChung

YOU MIGHT ALSO LIKE:

Here are the current long-term leaders

What’s New in Investor’s Corner

IBD 50 Stocks to Watch

This is still the golden rule of investing

Airbnb joins the ranking as a half-size position; Which stocks are also on the lists?

Karen J. Nelson