Morningstar | Airbnb Analysis Proves Timely: SEC Looks to Let More Small Investors Into Private Equity Fundraising
On Aug. 30, The Wall Street Journal has reported that the SEC is considering options that allow retail investors the opportunity to take part in fundraising for private companies, such as Airbnb and Uber. In July, and in collaboration with Pitchbook, we published detailed reports on these sharing economy companies and rated both with narrow economic moats.Ahead of its anticipated IPO in 2019-20, we see Airbnb's current market capitalization ranging between $53 billion ($180 per share) and $65 billion ($221 per share), based on a peer-based and DCF-derived exit multiple approach, 70%-110% higher than the $31 billion the company fetched at its most recent funding round in July 2017 and above the valuation of any hotel operator. Our valuation implies an enterprise value to 2019 EBITDA multiple range of 28-32 times (with an assumption of $3 billion in net cash), a premium to the 18 times awarded on average to other companies with online marketplaces.
Although, Airbnb faces competition in alternative accommodations for narrow-moat companies Expedia, Booking Holdings, and TripAdvisor, we believe a premium valuation is warranted based on several attractive features Airbnb offers investors, including: (1) a powerful and rare network advantage that should drive continued share gains in a rapidly growing alternative accommodations market; (2) an opportunity to expand its network and addressable market with vertical extension into hotel, experiences, corporate, and transportation; and (3) strong profitability prospects driven by the company's high consumer awareness that allow it to leverage top line growth. We believe Airbnb's IPO should be on the radar screens for investors seeking exposure to a company positioned to gain share in the nearly $700 billion global online travel market that we estimate will grow 9.4% annually on average over the next five years.
For more information, please refer to our July 2018 report "Airbnb's Network Effect Offers Investors a Unique Stay." For Uber, please see our July 2018 report titled "Uber May Pick Up Investors, Along With Riders, in Its IPO."
Marriott International is a worldwide operator, franchisor, and licensor of hotel, residential and timeshare properties under various brand names at different price and service points. The company has operations in the following reportable business segments: North American Full-Service, which includes the company's Luxury and Premium properties located in United States and Canada; North American Limited-Service, which includes the company's Select properties located in United States and Canada; and Asia Pacific, which includes all properties in the company's Asia Pacific region.
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