Booking Holdings Inc. (NASDAQ:BKNG) closed at $159.02 on October 2, and Airbnb, Inc. (NASDAQ:ABNB) at $162.43.
The two share prices are almost identical. Over the past twelve months, one of them rose by a third, and the other fell by a quarter, and the one that fell is the more profitable business.
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Booking Earns More on Every Dollar:
The operating gap between them is wider than their reputations suggest. Booking turns 34.41% of revenue into operating profit. Airbnb manages 21.01%.
That thirteen-point gap is the whole difference between the two models. Booking lists rooms somebody else built, insured, and staffed, while Airbnb has to police millions of individual hosts it does not employ.
The cash follows. Booking produced $7.73 billion of levered free cash flow against $3.21 billion at Airbnb. Earnings grew 117.90% at Booking in the most recent quarter, which is not the profile of a business in decline.
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Airbnb Grows Faster and Owes Nothing:
Here is what the share prices have been responding to. Airbnb grew revenue 16.50% in the most recent quarter against 8.10% at Booking. For investors paying for growth rather than for margin, that is the number that matters.
The balance sheets are a genuine contrast. Airbnb holds $12.07 billion of cash against $2.50 billion of debt, so its enterprise value of $78.62 billion sits well below its market value of $88.19 billion. Booking is the other way round, with $20.92 billion of debt against $17.21 billion of cash.
Airbnb also earns 34.54% on equity, which is a strong figure and reflects how little capital the business needs. The supply is the difference nobody can copy quickly. Airbnb’s inventory is millions of homes that no hotel chain owns, and no competitor can simply build.
Booking is the cheaper of the two and one of the few large travel names trading below the market multiple. You can find more of them here.
The Valuation Case:
Sustainability sits with Booking. Hotel commissions recur because hotels have no better way to fill empty rooms, and the business has survived every attempt to disintermediate it.
Airbnb’s growth is faster, but its supply is individual hosts, who are more easily tempted elsewhere than a hotel chain with a distribution contract.
On price, the gap is stark. Booking trades at 13.28 times forward estimates against 25.38 times for Airbnb, so an investor pays roughly half as much for each dollar of next year’s profit.
