Navigating IPOs can be tricky territory for traders … The AirBnB IPO is a prime example.
On one hand, there’s a sense of urgency to buy right away so that you can benefit if the stock pops. But what if it doesn’t pop? You could be playing the lead role in “Honey, I Shrunk My Account.”
Trust me, no trader wants to play that role.
Right now, plenty of traders are in yet another flurry over another potential IPO. This time it’s Airbnb.
But is it really hot, or is it all hype? Here, I’ll take a deeper look at the idea of an Airbnb IPO, including my thoughts on whether it’s worth your time and trading effort.
Naturally, these are my opinions, alone. All trading involves risk, and there’s no 100% guaranteed rule that tells you what every stock will do in every situation. So always do your own research first.
Airbnb: Great Concept, Great Company
Let’s get one thing straight from the get-go: I love Airbnb. I’m amazed at what it has to offer. Even a few years ago, the idea of going online to find pet-friendly cabins in rural northern Michigan was unheard of.
Today, I can do that on a regular basis when I want to get away with my whole family — even the furry members.
But just because a company is cool and offers a great service doesn’t necessarily make it worth your trading dollars. So let’s take a look at the numbers.
Financially speaking, Airbnb doesn’t present the same red flags that you might notice with a stock like Blue Apron. Unlike a lot of other tech companies, Airbnb is currently profitable (at least on an EBITDA or earnings before interest, taxes, depreciation, and amortization basis).
It’s said to be valued at $38 billion on the low end and recently hit 500 million guests.
Looking at Comparable Recent IPOs
To get a better idea of whether or not the Airbnb IPO should be on your radar, let’s take a look at some recent tech IPOs.
Lyft’s recent IPO should be your cautionary tale here. The company made a market debut with shares priced at $72. Shares spiked briefly, then tanked. As of the time of this writing, shares are trading for about $58.
But that doesn’t mean every tech IPO will follow that same trajectory. In Lyft’s case, I think they got greedy with the IPO. They upped their price — the initial proposed per share price was between $62 and $68 — and got caught with their hand in the cookie jar.
Plus, other recent IPOs like Zoom and Pinterest tell a different story.
Pinterest (PINS), an online visual library resource, was offered at $19 per share. At the time of this writing, less than a week after the IPO, it’s trading for about $26 per share.
Zoom (ZM), a webcasting service (the one we use to record the SteadyTrade podcast, actually!), was initially offered at $36 per share … and quickly zipped up to over $60 per share. As of this writing, it trades for about $65 per share.
The Bottom Line on Airbnb
So … is Airbnb worth your time and attention? Ultimately, I think so.
BUT, as with any IPO, I suggest approaching Airbnb with caution. While a stock could pop on its first day, often enough it doesn’t.
Don’t fall into the FOMO trap. Give it a day or two. Let the chart develop and track the price action on StocksToTrade.
Remember all the traders who bought Lyft on day one — right now they’re probably not feeling so hot about their decision. It can be worth it to wait!
How are you planning to track and trade Airbnb? What’s your trading experience with IPOs this year? Leave a comment and let me know!