Why Airbnb Stock Popped 14.2% This Week - Economygalaxy

Why Airbnb Stock Popped 14.2% This Week - Economygalaxy

What happened

Shares of Airbnb (NASDAQ: ABNB) rose 14.2% this week, according to data from S&P Global Market Intelligence. An analyst firm raised its price target on the home-sharing platform, and the company also got a boost from broad market gains. In other news, one of the company's co-founders announced he would be stepping down from the leadership team. 

So what

Earlier this week, Stifel Nicolaus raised its price target for Airbnb from $125 a share to $180 a share. With Airbnb's current share price at only $108, investors likely took this as a sign Wall Street is bullish on the company.

Analysts raise their price targets when they think a stock will move to a certain level within a year or so, so a steep rise up to $180 definitely caught the attention of the investment community.

A lot of the gains this week for Airbnb likely came from broad market movements. The Nasdaq 100 Index is up 7.23% in the last five trading days. A rising tide lifts all boats, and the inflows from investors helped raise the price of Airbnb's shares.

In other news, Airbnb announced its co-founder Joe Gebbia would be stepping down from the leadership team soon. Gebbia will remain on the board of directors. Throughout last year, he's been selling a huge portion of his stake in Airbnb, which likely led to downward pressure on the share price. This could have impacted Airbnb's stock-price movements.

Now what

Analyst price targets are fine, but what investors need to focus on is whether Airbnb is a good stock to own for the long haul. With a current market cap of $69 billion, the company trades at more than 85x its trailing operating income of less than $800 million.

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Its business model is obviously promising, but at this earnings ratio, it's hard to see how shareholders will get very good returns over the next decade unless Airbnb becomes one of the next technology giants. If you're thinking about buying shares of Airbnb, you need to be extremely optimistic about the company's future growth. Source: MSN

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