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Why Airbnb Stock Is Flying Higher Today

What happened

Shares of Airbnb (NASDAQ: ABNB) enjoyed a strong rally today, benefiting from the absence of the bad news that's weighed on the stock for the past week. At 2:50 p.m. EST on Thursday, Airbnb stock was up 10.4%.

So what

Airbnb shares have had a rough week, beginning with the company's announcement just prior to the inauguration that it was canceling room reservations in Washington and refunding its hosts for revenue lost from guests who would no longer be coming.

One day later, analysts at Truist Securities initiated coverage of the stock with a below-market target price of $154 a share, warning that all the positive expectations are already priced into the stock.

And earlier this week, research firm Redburn, according to TheFly.com, initiated coverage of Airbnb shares with a sell rating and a price target of $74.

Image source: Getty Images.

Now what

That last one must have really spooked investors, because the day after it came out, Airbnb shares dropped 7%. But was Redburn right to be so pessimistic about Airbnb?

On the one hand, yes, Airbnb looks to be in pretty dire straits right now. An exceedingly inconveniently timed pandemic has the new IPO staring at a probable loss of more than $12 per share for 2020, according to analysts polled by S&P Global Market Intelligence.

But with a hoped-for recovery on the way, this year's losses should be as little as one-sixth that size. Within just a couple of years, analysts foresee Airbnb turning at least pro forma profitable. And by 2024, they're calling for actual GAAP profitability and nearly $2 billion in positive free cash flow.

The future's looking up for Airbnb, and today's price action reflects that.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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