3 Reasons To Sell Airbnb And Buy Booking Holdings Instead

seeking alpha2021-08-10

We had been waiting for a long time for Airbnb (ABNB) to enter the stock market, as we are fans of its house renting platform, but were deeply disappointed that its shares have never traded at what we...

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Weeeeeeeee
2021-08-10
Weeeeeeeee
Like and comment
NBAl
2021-08-10
NBAl
I would like to invest on company which has scope to improve and increase revenue.
Deonc
2021-08-10
Deonc
Both are good with strong network effect. Please like and comment.
pet
2021-08-10
pet
like and comment pls
- sleepymoon:
  Alright then

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It actually has more downloads and a better app rating than Airbnb. The Booking app has been downloaded more than 100 million times and has a 4.7/5 rating.\nSource: Google Play Store\nBeyond their namesake apps, Airbnb acquired Lastminute.com, and Booking Holdings owns other very popular websites and apps including OpenTable, Kayak, and Agoda.\n1. Reason #1 Business model\nBoth companies have very strong platform business models that benefit from network effects. People looking for travel accommodation tend to search first on the site with more/better options, and property owners tend to list their offerings on the platforms with more users. This creates a powerful network effect that reinforces the dominance of the platform. The main difference in the business model is that while they both compete on demand side of the platform for travelers, on the supply side Booking mostly features hotels while Airbnb has properties owned by individuals. We prefer Booking's focus on hotels given that it is more reliable and has less regulatory risks.\nAnother important business model difference is the market focus. Looking at Alexa.com we see that Airbnb is only the #217 most popular website worldwide, but it is #63 in the United States. Most of its website traffic comes from the USA, with some significant contribution from Japan and Mexico.\n\nSource:Alexa.com\nMeanwhile Booking is a lot more popular internationally, with its website being the #80 in the world, but #108 in the USA. Its website visits are a lot more distributed around the globe, with the USA as the most important contributor, followed by Italy and then Russia.\n\nSource:Alexa.com\nWhile both companies have relatively similar platform business models, we believe the focus on professional supply and international focus is somewhat preferable, but it can be said that both companies operate attractive and successful platforms.\n2. Reason #2 Regulatory issues\nOne big advantage Booking has is that by focusing on hotels it is not at odds with city and national government the way Airbnb is, with many cities battling the company over taxes and zoning rules.\n\nSource: Wired.com\nThere is some nuance to this point, since Booking is starting to add alternative accommodations and Airbnb has lastminute.com which focuses on hotels, but in general it is fair to say that the accommodation supply on Airbnb tends to be more problematic in terms of regulations or lack thereof.\nFor readers interested in a more in depth look at the issues cities have with Airbnb we recommendthis Wired article. Below we include an extract detailing the type of legal issues the company is facing:\n\n \"Read my lips: We want to pay taxes,” Chris Lehane, Airbnb’s global head of public policy,told the nation’s mayorsin 2016. In the years since, the home-sharing site has repeated the declaration in press releases,op-eds, emails, and onbillboards. On its website, Airbnb says it is “democratizing revenue by generating tens of millions of new tax dollars for governments all over the world.”But when Palm Beach County, Florida, a popular tourist destination, passed an ordinance in October 2018 requiringAirbnband other short-term rental companies to collect and pay the county’s 6 percent occupancy tax on visits arranged through their sites, Airbnb sued.Palm Beach County tax collector Anne Gannon wasn’t surprised. “We knew we were going to get sued,” she says. “That’s what they do all over the country. It’s their mode of operation.”\n\n3. Reason #3 Valuation, valuation, valuation\nIf the 3 most important things in real estate are location, location, location. When investing the 3 most important things are valuation, valuation, valuation.\nDespite the similarities between the two companies, investors are paying almost twice for a dollar of revenue for Airbnb compared to Booking.\nData by YCharts\nSimilarly a quick look to the EV/EBITDA multiples shows again that investors are valuing Airbnb at a huge premium to Booking. Below we show the difference, with EBITDA being the estimate for the coming year (i.e. forward estimate). We do not think it is reasonable to value a dollar of earnings from Airbnb at more that 3x a dollar of earnings for Booking.\nData by YCharts\nIt could be argued by some that the valuation difference is due to faster growth by Airbnb, so we will proceed to compare both companies using a DCF model.\nWe used the earnings estimates from Seeking Alpha to build a discounted cash flow model for each. We start with Airbnb where we use more than ten years of analyst estimates, and then we assume an above GDP long-term growth rate of 5%. For the discount rate we use 10% since that is the minimum return we would be willing to accept as investors in the company.\n\nSource: Seeking Alpha\n\n\n\nFiscal Period Ending\nEPS Estimate\n# Analysts\n\n\nDec 2021\n-$1.99\n26\n\n\nDec 2022\n-$0.11\n24\n\n\nDec 2023\n$0.57\n18\n\n\nDec 2024\n$1.27\n9\n\n\nDec 2025\n$2.42\n7\n\n\nDec 2026\n$3.41\n5\n\n\nDec 2027\n$5.25\n3\n\n\nDec 2028\n$6.16\n3\n\n\nDec 2029\n$7.55\n2\n\n\nDec 2030\n$9.02\n2\n\n\nTerminal value\n$180.40\n5% growth per year\n\n\nDCF value per share\n$86.02\n10% discount rate\n\n\n\nThe DCF model result of $86 per share for Airbnb is significantly lower than its recent trading price of ~$150.\nRepeating the exercise for Booking we obtain an estimated value per share of $3,422 compared to a recent trading price of $2,182. We therefore believe Booking Holdings is trading at a more than 33% discount to fair value, with a very nice margin of safety.\n\nSource: Seeking Alpha\n\n\n\nFiscal Period Ending\nEPS Estimate\n# Analysts\n\n\nDec 2021\n$40.71\n29\n\n\nDec 2022\n$98.10\n29\n\n\nDec 2023\n$124.71\n19\n\n\nDec 2024\n$142.74\n6\n\n\nDec 2025\n$156.53\n5\n\n\nDec 2026\n$180.59\n3\n\n\nDec 2027\n$201.19\n2\n\n\nDec 2028\n$247.76\n1\n\n\nDec 2029\n$278.76\n1\n\n\nDec 2030\n$308.11\n1\n\n\nTerminal value\n$6,162.20\n5% growth per year\n\n\nDCF value per share\n$3,422.16\n10% discount rate\n\n\n\nConclusion\nAirbnb and Booking Holdings are both high-quality platform businesses that will likely benefit from the increase in online travel bookings. However, at present time, we think Booking Holdings is the better option thanks to its international strategy, focus on hotels, and more than anything a much more reasonable valuation.","kind":null,"is_publish_news":false,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":896777400,"gmtCreate":1628608042600,"gmtModify":1676529796783,"author":{"id":"4090294040868890","authorId":"4090294040868890","name":"Weeeeeeeee","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Like and comment","listText":"Like and comment","text":"Like and comment","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/896777400","repostId":1103660662,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":896240788,"gmtCreate":1628587778944,"gmtModify":1703508628215,"author":{"id":"3582610336531043","authorId":"3582610336531043","name":"NBAl","avatar":"https://static.tigerbbs.com/de8d0324ec977b11182ed837042b62e1","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"I would like to invest on company which has scope to improve and increase revenue.","listText":"I would like to invest on company which has scope to improve and increase revenue.","text":"I would like to invest on company which has scope to improve and increase revenue.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/896240788","repostId":1103660662,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":896656154,"gmtCreate":1628580647178,"gmtModify":1703508476228,"author":{"id":"3569316529855154","authorId":"3569316529855154","name":"Deonc","avatar":"https://static.tigerbbs.com/d9aa45dd2eb58357f6477dcfb99d1415","vip":1,"crmLevel":3,"crmLevelSwitch":1},"htmlText":"Both are good with strong network effect. Please like and comment.","listText":"Both are good with strong network effect. Please like and comment.","text":"Both are good with strong network effect. Please like and comment.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/896656154","repostId":1103660662,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":896625662,"gmtCreate":1628580100556,"gmtModify":1703508463828,"author":{"id":"3574914454410809","authorId":"3574914454410809","name":"pet","avatar":"https://static.tigerbbs.com/d8bb8cf9a25355b93399ce59a269665b","vip":1,"crmLevel":6,"crmLevelSwitch":0},"htmlText":"like and comment pls","listText":"like and comment pls","text":"like and comment pls","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/896625662","repostId":1103660662,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5481586,"gmtCreate":1628583607850,"gmtModify":1663232168527,"authorId":3555884467896100,"author":{"id":3555884467896100,"authorId":3555884467896100,"name":"sleepymoon","avatar":"https://static.tigerbbs.com/017d47c34167b5c3d7accfb69274dd36","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":896625662,"type":1,"supId":0,"prevId":0,"content":"Alright <u>then</u>","text":"Alright <u>then</u>","html":"Alright <u>then</u>"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":30,"commentSize":4,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1103660662"}