Airbnb (NASDAQ: ABNB) and DoorDash (NYSE: DASH) were two of the hottest IPOs of 2020. Both companies went public with their stock seeing big jumps from their IPO prices. Airbnb went public on December 10 at $68 per share, closed more than 100% higher on its first day, and continued rising to around $200 in the stock market today. On the other hand, DoorDash, which made its public debut one day earlier at $102 per share, closed nearly 90% higher on its first day and has made small gains ever since.
Unless you have been living under a rock, you would know these companies operate in different markets. One is travel-dependent (which is not that great during the pandemic), and once thrived during the pandemic. In other words, the pandemic generated tough headwinds for the vacation rental online marketplace but brought strong tailwinds for the food delivery company.
So how do the two companies compare and which is likely the better pick for investors? Let’s take a look at the recent performance, valuation, and outlook for the two companies in more detail.Airbnb
Airbnb is a website and online platform that allows hosts to rent out spaces to temporary guests. Some would say it’s better than a hotel. This could be because Airbnb could offer at a more competitive rate and arguably provide the same level of comfort to guests.
For those unfamiliar, Airbnb has seen some pretty exceptional growth over the years. From generating revenue of $919 million in 2015 to $4.8 billion in 2019, this speaks volumes of the potential the company could be able to bring when the pandemic is over.
Things were going great, but then came the pandemic. Revenue fell 32% lower year over year to $2.5 billion as the pandemic disrupted global travel and tourism. In addition, its net loss also widened again year over year from $322.8 million to $696.9 million. Analysts expect Airbnb’s revenue to decline 32% to $3.27 billion for the full year. Prospective investors wishing to build a position in the stock may be better off investing in ABNB stock after the company reports its quarterly report on February 25.Airbnb’s Long Term Potential Remains Robust
Investors expecting a rebound in rental activity in the previous quarter might want to revise their expectations. Following another wave of COVID-19 infections in the final quarter of 2020, many countries imposed strict lockdowns, particularly in Europe. While the actual impact remains to be seen, it’s safe to assume that the impact in the final quarter will be similar to the fresh outbreak observed in March 2020.
According to the filing, the company expects “significantly greater year-over-year decline in Nights and Experiences Booked and GBV in the fourth quarter of 2020 than in the third quarter of 2020 and greater year-over-year increases in cancellations and alterations in the fourth quarter of 2020 than in the third quarter of 2020.“Source: TD Ameritrade TOS
With all that being said, Airbnb’s headwinds could fade after the pandemic is over and people start to travel again. And if you take into consideration that many people’s savings took a hit during this pandemic, Airbnb could bounce back stronger. After all, Airbnb’s more competitive rates could be more favorable than pricier hotels. However, serious investors should also assess the risk that comes with investing in ABNB stocks. They include regulation on properties regarding short-term rentals and potential dips from lock-up expiration. Nevertheless, with a strong brand name to boot, ABNB stock could thrive after the pandemic. Do you have it on your watchlist?DoorDash
DoorDash is a food delivery platform that allows users to order food and receive it at their doorsteps. The company was only founded eight years ago. But it quickly climbed through the rank and overtook Grubhub (NYSE: GRUB) as the largest food delivery service in the U.S. We all know that pandemic was the catalyst for food delivery companies, and DoorDash is no exception.
Now, the number of COVID-19 deaths has surpassed the 500,000 mark in the US. I guess it’s safe to say that the demand for food delivery will stick around or even increase in the coming months. If we were to compare the financial standings of both Airbnb and DoorDash, the latter is clearly the winner. Since the tailwinds generated from the pandemic are working in favor of the company, most would agree that DASH stock would be the better investment.
While that may be true in the near term, the same thing couldn’t be said the same towards its long-term growth. Investors will get a clearer picture of DoorDash’s future when it reports quarterly earnings on February 25 after the market closes.DoorDash’s Growth In The Post Pandemic World
DoorDash’s revenue rose 204% to $885 million in 2019, then skyrocketed 226% year over year to $1.92 billion in the first nine months of 2020. This came as more restaurants relied heavily on food delivery companies to keep their business running. However, the real question here is, what happens when the world is back to a pre-pandemic environment? Many are expecting the growth in DoorDash to decelerate quickly. This makes it impossible to gauge the growth of DoorDash over the next few years. Yet, the company is not resting on its laurels. You can see that by the company’s expansion into grocery deliveries. That’s in addition to partnerships with convenience stores including 7-Eleven and pharmacy chains including CVS.Source: TD Ameritrade TOS
Demand for DoorDash services has been epic. That cemented its position as the premier delivery-logistics network in the US. The company now commands more than half of the market share, thanks to its decision to focus on smaller markets. Investors are expecting another strong performance from DASH stock this week. While it’s not wrong to be optimistic, its ability to scale at ease also comes with a cost. Moving forward, investors should also note that the company still faces demands to reclassify its “Dashers” from independent contractors to full-time employees across several states.DASH Stock Or ABNB Stock?
Overall, DoorDash looks like the stronger contender right now. Looking at its strong growth and a potentially more attractive valuation, short-term investors would probably love DASH stock. Not to mention there have been reports of weaker response to mRNA shots to new variants in South Africa. This suggests that the pandemic may not go away anytime soon.
On the flip side, if you believe that international travel is going to resume soon enough, then ABNB stock may be the better bet for you. But I wouldn’t touch it just yet. That’s until we approach border reopenings. And when that happens, Airbnb’s revenue would start rising again.