Is Airbnb Now a Bargain After Its 4.6% Weekly Rise?

If you have been watching Airbnb's stock and asking yourself whether now is the right time to buy, sell, or simply hold steady, you are not alone. With shares closing at $128.56 recently, the company finds itself at a crossroads that has caught the attention of investors and analysts alike. Over the past week, the stock jumped 4.6%, building on a modest 1.2% gain over the last month. Yet, looking back over the past year, Airbnb is down 5.2%. Those shifts have a lot to do with how markets are digesting both big-picture travel trends and company-specific developments, such as Airbnb's continued expansion into new markets and its ongoing regulatory negotiations in key cities.

This past year has seen Airbnb navigate an evolving landscape, from tightening short-term rental regulations to fierce competition and macroeconomic uncertainties. Despite these headwinds, Airbnb’s core business remains resilient, and investors are re-evaluating their expectations. That explains why, even with a slightly negative trend year to date, the market’s recent mood seems increasingly optimistic about Airbnb’s growth prospects. The valuation story, as reflected by a value score of 4 out of 6 key checks for undervaluation, is far from simple. Some investors see bargains, while others see risks lurking just below the surface.

So, how should you interpret this mix of performance history, evolving business news, and the current valuation score? Let’s break down the fundamental valuation methods and see how Airbnb stacks up. And if you are craving a deeper take on what moves the valuation needle, stick around. The best framework for making sense of Airbnb’s stock might surprise you.

Why Airbnb is lagging behind its peers

Approach 1: Airbnb Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and discounting them back to their present value. This approach helps investors understand what the business is fundamentally worth, based on its ability to generate cash in the years ahead.

For Airbnb, the DCF analysis begins with its latest twelve-month Free Cash Flow (FCF) of $4.3 Billion. Analysts provide detailed estimates up to five years out, forecasting steady growth in annual FCF. By 2029, projections suggest Airbnb's FCF will reach approximately $6.8 Billion. Beyond these analyst estimates, additional growth is forecasted based on reasonable long-term assumptions.

Applying the 2 Stage Free Cash Flow to Equity DCF model, the present value of all these future cash flows produces an intrinsic value of $210.47 per share. Given the recent share price of $128.56, this implies the stock is trading at a 38.9 percent discount to its estimated fair value.

Based on this DCF model, Airbnb appears significantly undervalued, suggesting a strong margin of safety for those considering an investment today.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Airbnb.

Our Discounted Cash Flow (DCF) analysis suggests Airbnb is undervalued by 38.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Airbnb Price vs Earnings

The Price-to-Earnings (PE) ratio is a favored metric for valuing profitable companies like Airbnb, as it directly relates a company’s market price to its bottom-line earnings. When a business is consistently generating profits, the PE ratio helps investors judge how much the market is willing to pay for each dollar of those earnings. This makes it particularly suitable in this scenario.

However, what counts as a “normal” or “fair” PE ratio varies according to several critical factors. Generally, higher expected earnings growth and lower perceived risk will push the fair PE higher. Companies facing more uncertainty or sluggish growth should trade at a discount to peers.

Currently, Airbnb trades at a PE ratio of 30x. Compared to its hospitality industry average of about 24x and peer group average of 32x, Airbnb sits between these benchmarks. Yet, raw comparison only tells part of the story.

Simply Wall St’s proprietary “Fair Ratio” for Airbnb is 31x. This figure is more tailored than simple industry or peer averages, as it specifically factors in Airbnb’s expected profit growth, risk profile, margins, and market size. By accounting for these additional variables, the Fair Ratio offers a more holistic perspective on what price is justified for Airbnb’s stock.

With the actual PE ratio at 30x and the Fair Ratio at 31x, Airbnb’s valuation is essentially right in line with what should be expected given its financial profile.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Airbnb Narrative

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, story-driven framework that lets you define your view of Airbnb, connecting your expectations for its growth, risks, and business direction to your financial forecast and ultimately to your own fair value estimate.

On Simply Wall St’s platform, millions of investors use Narratives (found on the Community page) as an approachable tool to bring their research and perspective to life, all backed up by numbers. Narratives allow you to see and compare how different viewpoints, such as a bullish or cautious outlook on Airbnb’s international expansion, travel trends, or regulatory challenges, result in a specific Fair Value versus today’s market price, helping you decide whether it’s time to buy or sell.

Best of all, every Narrative updates dynamically as new data, news, and earnings reports arrive, so your view evolves as the facts do. For example, some investors may see Airbnb’s fair value as high as $181, assuming quick wins in global markets and new revenue streams, while others see it as low as $98 due to regulatory or competitive concerns.

Do you think there's more to the story for Airbnb? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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