Airbnb, Inc. (ABNB), which is headquartered in San Francisco, and InterContinental Hotels Group PLC (IHG), based in Denham in the U.K., are two popular players in the travel and tourism industry. ABNB, which went public on December 10, 2020, operates a platform for stays and experiences to guests worldwide. The company offers lodging, homestay, and tourism services via websites and mobile applications worldwide. In comparison, IHG owns, manages, franchises, and leases hotels, resorts, restaurants, and spas worldwide.
Thanks to solid progress on the vaccination front and pent-up demand for travel and tourism, the travel industry witnessed a slight uptick earlier this year. But the rapid spread of the COVID-19 Delta variant is expected to impact travel demand significantly in the near term. However, several developments by ABNB and IHG should help them benefit in the long run. In fact, the global travel and tourism market is expected to grow at 3.1% CAGR to reach $8.9 trillion by 2026.
In terms of their past month’s performance, ABNB is a winner with 9.3% price gains versus IHG’s negative returns. But, which of these stocks is a better pick now? Let’s find out.
On August 9, 2021, ABNB partnered with UNESCO to develop projects to promote destinations and experiences outside of the traditional tourist circuit in Mexico to incorporate micro, small, and medium creative, cultural, and tourism entrepreneurs in the tourism value chain. ABNB hopes to generate increased bookings in Mexico, revealing new growth opportunities for cultural and creative development.
On August 17, 2021, IHG’s IHG Hotels & Resorts partnered with Ha Long Bay Hotel Joint Stock Company to create a spectacular new resort in Halong City, Vietnam. Set to open in 2023, Holiday Inn Resort Halong Bay will be an iconic landmark in the city’s skyline owing to its favorable location and towering architecture. IHG plans to build two more resorts in the country over the next three years and hopes to witness high demand and offer a great holiday experience to its customers.
Recent Financial Results
ABNB’s revenues for its fiscal second quarter, ended June 30, 2021, increased 298.8% from the prior-year period to $1.34 billion. The company’s loss from operations declined 91.2% year-over-year to $51.28 million. ABNB’s net loss came in at $68.22 million for the quarter, down 88.1% from the prior-year period. Its loss is reported at $0.11, representing a 95% year-over-year decline. The company had $5.67 billion in cash and cash equivalents as of June 30, 2021.
For the half-year ended June 30, 2021, IHG’s total revenues decreased 5.5% year-over-year to $1.18 billion. The company’s operating profit came in at $138 million, compared to a $233 million loss in the prior-year period. While its adjusted earnings increased 722.2% year-over-year to $74 million, its adjusted earnings increased 724.5% year-over-year to $0.40. IHG had $988 million in cash and cash equivalents as of June 30, 2021.
Expected Financial Performance
Analysts expect ABNB’s revenue to increase 68.2% year-over-year in the current year and 25.7% next year. Its EPS is expected to remain negative in the current year but increase 698.8% year-over-year in the next year.
IHG’s revenue is expected to increase 40.5% year-over-year in the current year and 29.4% next year. Its EPS is expected to grow 280% in the current year and 113.2% next year.
ABNB’s trailing-12-month revenue is 2.4 times IHG’s. However, IHG is more profitable, with a 21.8% EBITDA margin versus ABNB’s negative returns.
IHG’s 14.2% ROTC value compares favorably with ABNB’s negative value.
In terms of non-GAAP forward P/E, ABNB is currently trading at 2751.55x, which is 5181.3% higher than IHG’s 52.10x.
And in terms of forward EV/Sales, ABNB’s 14.81x is 50.8% higher than IHG’s 9.82x.
While ABNB has an overall C grade, which translates to Neutral in our proprietary POWR Ratings system, IHG has an overall B grade, equating to Buy. The POWR Ratings are calculated considering 118 distinct factors, each weighted to an optimal degree.
Both the stocks have an A grade for Sentiment, which is consistent with favorable analysts’ estimates regarding their revenue growth. Analysts expect ABNB’s revenue to be $5.68 billion for the current year, representing a 68.2% year-over-year improvement. IHG’s revenue is expected to increase 40.5% year-over-year to $1.39 billion for the current year.
In terms of Growth, both the stocks have been graded a B, which is in sync with their impressive cash flow growth over the past year. ABNB’s levered free cash flow grew 470%, while IHC’s grew 331.9%, over the past year.
Of the 19 stocks in the Travel – Hotels/Resorts industry, ABNB is ranked #9, while IHG is ranked #3.
Beyond what we’ve stated above, our POWR Ratings system has also rated both IHG and ABNB for Value, Momentum, Stability, and Quality. Get all ABNB ratings here. Also, click here to see the additional POWR Ratings for IHG.
While the resurgence of COVID-19 cases is expected to dampen the travel industry’s recovery in the near term, both ABNB and IHG are well-positioned to benefit in the long run. However, we think its relatively lower valuation and better profitability make IHG a better buy here.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Travel – Hotels/Resorts industry.
ABNB shares were trading at $142.83 per share on Thursday afternoon, down $3.91 (-2.66%). Year-to-date, ABNB has declined -2.70%, versus a 18.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…