1 Undervalued Growth Stock Down 44% to Buy Before 2026

Airbnb (ABNB) is presented as a compelling investment opportunity despite its stock being 44% off all-time highs, driven by robust business performance including expanding profit margins and 255% cumulative revenue growth over five years. The company is achieving significant geographical expansion, with overall bookings up 12% year-over-year in constant currency, and is focused on margin expansion, aiming for operating margins comparable to Booking Holdings (>35%). While its current P/E is 29, aggressive share repurchases and projections of $20 billion in revenue with a 35% profit margin suggest a forward P/E of approximately 10, positioning it as a potentially undervalued long-term asset.

Analysis

Airbnb (ABNB) shares are currently 44% below all-time highs, yet the underlying business demonstrates robust performance. The company has achieved a cumulative revenue growth of 255% over the last five years, with expanding profit margins. Last quarter, overall bookings increased 12% year-over-year in constant currency, driven by both steady growth in core North American markets and significant expansion in new geographical areas.

Geographical expansion is a key growth driver, with first-time bookers in Japan jumping 20% year-over-year and India growing 50%. Latin America bookings rose over 20% and Asia Pacific saw mid-teen growth last quarter. Furthermore, Airbnb exhibits substantial long-term margin expansion potential; its current operating margin of 23% is expected to converge towards competitor Booking Holdings' (>35%) due to its asset-light, fee-based model and strong unit economics.

Despite a trailing P/E of 29, which exceeds the long-term market average, the company's forward outlook suggests a more attractive valuation. Projections indicate revenue could grow from $12 billion to $20 billion, potentially yielding $7 billion in earnings with a 35% profit margin, translating to a forward P/E of approximately 10 based on its $74 billion market cap. Management's aggressive share repurchase program, buying back nearly $1 billion quarterly, further enhances shareholder value.

Key Decisions for Investors

• Investors with a long-term horizon should consider establishing or increasing a position in ABNB, given its robust business performance, geographical expansion, and significant margin expansion potential.
• Closely monitor Airbnb's operating margin trajectory and continued booking growth in emerging markets, as these are critical indicators for realizing the projected forward earnings and valuation.
• Evaluate the ongoing impact of the aggressive share repurchase program on EPS and overall shareholder returns, as this capital allocation strategy is a significant factor in the bullish outlook.