The economic turmoil that was set in motion after the outbreak of coronavirus, created uncertainty and wariness in the stock market. Investors and stockholders nowadays monitor these volatile changes that were rippled by the pandemic. A global economic slump is making it hard to maintain liquidity, minimize losses, and ensure long-term survival in the ever-changing stock market, which is often used “as an indicator of the economy’s health”. In this day and age and with recent Covid-19 developments, it’s crucial to assess, adapt, and construct a rock-solid investment strategy if you are looking into buying stocks. But where should you invest, and why travel stocks? We’ll try to explain.
The hospitality and travel industries are multibillion-dollar industries that were hit the hardest and suffered million-dollar losses in almost all of their subcategories and fields. Lodging, food and drink services, event planning, travel, tourism, and transportation were suddenly halted by new governmentally issued health regulations that dictated travel bans, social distancing, and overall lockdowns. Subsequently, hotels, rentals, restaurants, and bars were highly restricted, if not closed altogether. In turn, it shattered their quartal incomes and created a potential danger regarding the future of those companies. So, if that seems to be the case, why invest in travel stocks in particular
If you are looking to diversify your investment portfolio and park your money in a potentially lucrative field, a logical thing to do would be to invest in a market that didn’t suffer such immense consequences as the hospitality and travel industry; some alternative investments maybe, and not the traditional or mainstream asset classes such as public equity, fixed income, and cash equivalents. Nonetheless, even though demand in these fields was shut off for several months, the restrictions are slowly being lifted, and the backlash of Covid-19 is being managed differently. Also, hospitality and travel requirements have returned to a certain degree, so now it’s up to companies to come up with ways to surpass issues such as always changing health regulations, diminished workforce, halted investments, and shut operations. This is how some of them did it.
It was announced earlier this fall that Airbnb, one of the short-term rentals giants, is going public with investment bankers pricing their stock at $56-60 per share. While the official numbers are yet to be published, it is estimated that Airbnb (NASDAQ: ABNB) is worth $47 billion at its IPO price, having a share count of 602,448,251. After the first wave hit the company hard, with losses of $18 billion, executives managed to keep the company afloat by laying off staff and taking on external capital. From the first quartal to the second, the home rental platform has managed to recover and earn the right to go public and get its highest valuation price to date.
This unfortunate IPO timing means that you, as an investor or potential shareholder, can profit immensely from the underpricing of Airbnb stock. Experts predict the company to grow 35% per year and earn approximately $6 billion in revenues by 2022. So, even though it suffered tremendous losses caused by the pandemic, the company seemed to have navigated its way to a brighter future and a definite post-covid survival, unlike travel industry peers.
This, combined with Airbnb stock’s current underpricing, predicts a win-win solution for the company itself, but first and foremost for prospective investors and shareholders. Another confirmation of the fact that short-term rentals companies are the future of travel stocks is the fact that Airbnb is already priced higher than two hotel chains; Marriott at $42 billion and Hilton at $30 billion. The difference in business models makes Airbnb a fantasy fulfillment from a financial perspective since it isn’t in possession of its listed properties.
To conclude, the research and assessment that has been done so far by investment bankers, analysts, and stock experts show a solid overview of the travel stock exchange so far. Despite the pandemic enlarging worldwide losses in the hospitality and travel industries, the predictions seem promising as Airbnb enters the stock exchange market. The company aims to raise over $3 billion this month, which would make them one of the biggest IPOs of 2020. So, if you are looking for a potential long-term investment that promises profit and rising numbers in the coming years, travel stocks and Airbnb specifically is worth pooling into. The company’s employees are allowed to sell up to 15% of their shares after this IPO debut, allowing reasonable pricing of the additional shares coming to market for regular investors to acquire, so don’t sit this one out.