Remote Work And Global Expansion Will Unlock New Markets In Brazil And Japan

Key Takeaways

• Expansion into long-term stays and new international markets, combined with efficiency improvements, positions Airbnb for sustained topline growth and broader earnings diversification.
  
• Enhanced cross-selling of experiences, services, and homes leverages network effects, boosting retention, platform defensibility, and long-term profitability.
  
• Regulatory pressures, slowing mature market growth, uncertain returns on new initiatives, rising competition, and costly marketing shifts threaten Airbnb's profitability and expansion prospects.

Catalysts

Operates a platform that enables hosts to offer stays and experiences to guests worldwide.

• The broad shift towards remote and hybrid work is enabling more people to travel for extended periods, directly expanding Airbnb's addressable market for both short-term and long-term stays. This supports sustained revenue growth and drives greater usage per customer, benefitting topline expansion.
  
• Younger generations increasingly value experiences over possessions, boosting demand for unique travel experiences and alternative accommodations. Airbnb's high attach rates for new Experiences and Services tap directly into this, potentially increasing ARPU and margin as cross-selling to travelers and locals accelerates.
  
• Strong international expansion, especially in markets like Brazil and Japan, demonstrates success in shifting the business mix away from saturated core markets. As these newer regions grow faster than legacy markets, Airbnb's consolidated revenue growth and earnings diversification are positioned to improve over the next several years.
  
• Operational efficiency gains-such as the rollout of AI-driven customer service and dynamic pricing-are reducing operational costs and improving scalability, setting the stage for higher net margins and stronger operating leverage as new revenue streams mature.
  
• Integration of experiences, services, homes, and hotels within a single platform-reinforced by strong network effects and a growing loyal customer base-improves guest/host retention and expands cross-selling, supporting long-term profitability, platform defensibility, and more stable future earnings.

Airbnb Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Airbnb's revenue will grow by 10.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 22.7% today to 24.2% in 3 years time.
• Analysts expect earnings to reach $3.7 billion (and earnings per share of $6.21) by about August 2028, up from $2.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $2.7 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.6x on those 2028 earnings, down from 29.0x today. This future PE is greater than the current PE for the US Hospitality industry at 22.8x.
• Analysts expect the number of shares outstanding to decline by 3.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.42%, as per the Simply Wall St company report.

Airbnb Future Earnings Per Share Growth

Risks

• Intensifying regulatory scrutiny and political backlash against short-term rentals in major urban centers pose a risk to Airbnb's future growth, as increasing compliance requirements or outright restrictions could constrain supply and reduce revenue potential in core and expansion markets.
  
• Slower host and bookings growth in mature regions like North America and EMEA, compared to faster-growing expansion markets, signals possible plateauing of penetration in established geographies; this could limit future top-line growth and earnings acceleration, especially given mentions of only low single-digit growth in the U.S.
  
• Ongoing investments ($200M+ annually) in new verticals such as experiences and services are not expected to deliver material near-term revenue, with management indicating these businesses are still in their infancy, which may lead to compressed near-term net margins and risk of low ROI if adoption lags.
  
• Competitive threats from both traditional hotel brands (increasingly open to online channels) and emerging lodging platforms could compress Airbnb's market share and take rate, particularly as Airbnb's expansion into hotels and additional services opens it to direct competition and potential pricing pressure, impacting future profitability.
  
• Shifting marketing channels (from organic and brand-led to more performance/social) and reliance on social media to drive discovery could lead to increased customer acquisition costs over time as organic sources decline, which may pressure net margins and profitability if direct traffic weakens amid changing consumer digital behaviors.

Valuation

• The analysts have a consensus price target of $140.343 for Airbnb based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $200.0, and the most bearish reporting a price target of just $96.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $15.4 billion, earnings will come to $3.7 billion, and it would be trading on a PE ratio of 26.6x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $124.55, the analyst price target of $140.34 is 11.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.