Profit Pregame

Here’s Exactly How You Should Play Airbnb’s IPO

Airbnb is aiming to go public

In a turn of events, this startup just did something unexpected.

What’s happening?

Despite the trying times, the travel industry has been going through for the last six months – Airbnb just decided to move ahead with its plans to go public. On Wednesday, the company announced that it had submitted confidential paperwork with the US Securities and Exchange Commission for an initial public offering.

The company was founded in 2008 and quickly disrupted the travel and hotel industry. And this disruption paid off in a big way as it quickly became one of the most valuable private startups globally, reaching a valuation of $31 billion at one point.

And over the last few years, Airbnb has reported that it was profitable – specifically in 2017 and 2018, which set it apart from many other startup companies that have hemorrhaging before and after going public.

But the company began to lose money in 2019. And I’m sure it comes to no surprise that the trend has continued as the pandemic has ravished 2020. That’s about 25% of their workforce.

Where’s the money?

The global pandemic rattled Airbnb to its core – including many of the “hosts” who power the app.

In fact, in May, CEO Brian Chesky expressed in a letter to employees that its business had been “hit hard” and revenue for the year was expected to be less than half of what the company earned in 2019. HE followed this grim prediction up with an even bleaker announcement – Airbnb would be letting go of nearly 1,900 employees worldwide. That’s about 25% of their workforce.

Now, with that said, Airbnb has mounted a comeback since the pandemic slammed the travel market. And it has high hopes for a continued flow of cash as consumers look to get outside the house as stay-at-home orders are rolled back.

But even with the predicted bright future, this IPO isn’t going to be on my investment list. And here’s why…

How can I get some?

No matter how positive the future might look, nothing can overshadow lousy timing. And that’s what I’m seeing with Airbnb right now. On top of their 1,900 layoff – the company is also worth about half of what their valuation was three years ago.

And if I’m honest, this rush to IPO reminds me of the when the world saw WeWork try to go public. The company’s finances were in shambles – and it garnered a lot of criticism from the media and investors alike.

WeWork was desperate for capital, and it looks like Airbnb is too.

So, the best way to invest in the Airbnb IPO? You don’t.

But if you’re itching to play this downturned travel sector – the best way you can go about it is short hotels while also purchasing SPY to hedge against it. But for me, I’ll be keeping my distance from this industry and look to invest in specific stocks such as XLF and GLD.

In the spotlight: A disappointing (but not surprising) jobs report

Just last week, we were “celebrating” the fact that jobless claims had fallen below one million – a number that hadn’t been seen in months. But if we’ve learned anything over the last year, it’s that the coronavirus recovery will be anything but a straight line.

That’s why this morning, when the newest numbers came out, crossing back over the one million filed threshold – it wasn’t as jarring as one might think.

Another 1.1 million Americans filed initial claims for unemployment benefits last week. And while economists were optimistic about a steady downwards trajectory, I knew we most likely would see another uptick.

Because the truth is, recoveries are never simple or straight forward. Especially as the pandemic continues, and businesses around the country are still forced to keep their doors closed. And this disappointment was offset by another promising number. There was a larger-than-expected decrease in continued jobless claims. That number decreased to 14.8 million – which is still staggeringly high but also at the lowest level since the first week of April.

Keep in Mind…

It’s easy to fall victim to the hype from big news stories like the Airbnb IPO.

But even though they make headlines, they aren’t always set up to make money.

That’s why I developed my S.C.A.N. trading system… to separate the distractions from the true profit opportunities.

It analyzes millions of real, hard data points, and pays no mind to public opinion or excitement.

S.C.A.N. is the crux of my exclusive trading research service, the 1450 Club, and I want you to claim your membership today.

Community Tips

Inline Feedbacks
View all comments