3. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Holders: 57
Next on our list of the best growth stocks to buy according to Ray Dalio is Airbnb, Inc. (NASDAQ:ABNB), an American travel technology firm that enables hosts to offer stays and experiences to guests worldwide. Ray Dalio’s Bridgewater Associates held 771,399 shares of Airbnb, Inc. (NASDAQ:ABNB) in Q2 2022 worth $68.7 million, representing 0.29% of the total 13F securities. The hedge fund strengthened its hold on the stock by 290% during the June quarter.
On October 6, Jefferies analyst John Colantuoni maintained a Buy recommendation on Airbnb, Inc. (NASDAQ:ABNB) but lowered the price target on the shares to $138 from $140. His preference is to hold companies offering a combination of “competitive differentiation, exposure to attractive end-markets, levers to offset softer demand, and robust” free cash flow.
According to Insider Monkey’s data, 57 hedge funds were long Airbnb, Inc. (NASDAQ:ABNB) at the end of Q2 2022, compared to 66 funds in the last quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is a prominent position holder in the company, with 3.15 million shares worth about $281 million.
Here is what Polen Capital specifically said about Airbnb, Inc. (NASDAQ:ABNB) in its Q2 2022 investor letter:
“Airbnb, Inc. (NASDAQ:ABNB) was one of our largest detractors from performance in the second quarter. Airbnb is the clear market leader in private rental bookings globally, according to market research firm Euromonitor. The business is currently firing on all cylinders, with revenue and earnings growth well above our expectations and long-term estimates. It would be easy to say that it is because as the world reopens, people are traveling for the first time in two years, providing a short-term benefit to the company. But, Airbnb also grew quickly in 2021 when people were still hesitant to travel and preferred staying close to home. The company’s growth in 2022 is not an easy comparison like it is for online travel agencies (which are more hotel-oriented), airlines, and hotels. In fact, Airbnb’s business has outpaced the hotel industry growth by more than 1,250 basis points per year since 2019, showing far more resilience than hotels and online travel agencies.
Airbnb didn’t invent the private rental market, but it developed a better offering and helped it scale with robust network effects and a system of trust protecting travelers and hosts alike. It has diligently removed friction from the marketplace to catalyze demand.
The business model has very high incremental profit margins. When the company went public only a year and a half ago, it had pretax profit margins on a non-GAAP basis of approximately 5% by our calculations. This year, those margins should approach 30%. In addition, the company has generated approximately $3 billion in free cash flow over the last 12 months. The runway for growth in private rental is very long, especially considering that hybrid work will likely remain for the long-term, allowing for more business/leisure trips that work better in Airbnbs than hotels, in our view…” (Click here to read full text)
