How to Trade Airbnb (NASDAQ: ABNB) Today

Today we’ll walk you through a trade idea with Airbnb Inc. (NASDAQ: ABNB) that could deliver up to 18% returns in the next 3-6 months.

Airbnb, Inc. is an American company that operates an online marketplace for lodging, primarily homestays for vacation rentals, and tourism activities. Based in San Francisco, California, the platform is accessible via the website and mobile app.

Analyst Ratings

According to TipRanks, 22 analysts are offering 12-month price targets for ABNB in the last 3 months. 14 analysts rate it a buy, 8 analysts rate it a Hold, and none has a Sell rating. The average price target offered by these analysts is $179.68, which is an 11.31% upside from the last price of $161.42.

Why ABNB is trending?

The vacation rental company, Airbnb’s shares surged by nearly 10% yesterday, after Reuters reported that the company has offered to provide free, temporary housing to 20,000 Afghan refugees worldwide.

In addition to the positive PR that Airbnb will earn from this move, Airbnb had also received some good news recently, when analysts at DA Davidson reiterated their buy rating and $174 price target on the stock.

The company had recently reported strong second-quarter results and saw its revenue rise by almost 4x compared to last year to $1.34 billion, with its net loss narrowing considerably to about $68 million for the quarter. Q3 also appears to be on track to be Airbnb’s “strongest revenue quarter ever,” with revenue likely to top what Airbnb collected even in Q3 2019 before the pandemic struck.

With the Delta variant surging, Airbnb seems to be better positioned compared to hotels and other segments of the travel industry to tackle an extended pandemic. More people are likely to opt for driving holidays, possibly to less populated areas, while planning longer stays as companies have delayed return to office plans. For instance, over Q2, the company said that 19% of stays booked on its platform were for 28 days or more. This is also expected to be a tailwind for the stock.

However, Airbnb also has significant challenges. The company has not yet reached profitability. ABNB had improved its Net loss position in Q2 2021 to -$68 million.

Moreover, there are cheaper ways to play the vacation rental business, via the likes of Expedia which also owns Vrbo, a fast-growing vacation rental business. Expedia growth is expected to be stronger than Airbnb’s, with revenue poised to expand by 45% in 2021 and by another 40% in 2022 per consensus estimates. This could significantly impact the growth prospects for ABNB in the future.

With mixed factors in play, here’s how to trade ABNB now.

ABNB Chart

On analysis, there are multiple bullish indications on the daily chart of ABNB.

#1 IH&S Pattern Breakout: As you can see from the daily chart, the stock has also broken out of an Inverted Head and Shoulders (IH&S) pattern within the falling wedge pattern. This IH&S pattern is marked in the chart in pink color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.

#2 MACD above Signal Line: The chart shows that the MACD (light blue color) has currently crossed above the MACD signal line (orange color). This typically indicates a bullish setup.

#3 Above MA: The stock is currently above its 50-day SMA, indicating that the bulls are in control.

#4 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) and ADX lines are greater than the (-DI) line, and ADX is currently rising from below both (+DI) and (-DI). All these points to a possible upmove in the near-term.

#5 Bullish Stochastic: In the daily chart, the %K line (blue color) is currently above the %D line (orange color), indicating a bullish bias.

Below is the bullish and bearish play for ABNB.

Recommended Bullish Trade (based on the chart)

Buy Levels: If you want to get in on this trade, the buy level for ABNB is in two scenarios. These are marked as green color dotted lines in the daily chart.

• Buy Level #1: You can purchase the shares of ABNB above the price of $153.00.
• Buy Level #2: You can purchase the shares of ABNB above the price of $163.00.

Important Note: Make sure that you only enter the trade once the daily close is above the recommended price level.

TP: Our target prices for various buy levels are as follows

• The target prices for Buy Level #1 ($153.00) are $165 and $180 in the next 3 to 6 months.
• The target prices for Buy Level #2 ($163.00) are $170 and $180 in the next 3 to 6 months.

SL: To limit risk, place a stop loss at the following levels.

• The stop loss for Buy Level #1 ($153.00) is $147.00.
• The stop loss for Buy Level #2 ($163.00) is $159.00.

Note that the stop loss is on a closing basis.

Target Upside: Our target potential upside is 4% to 18% in the next 3-6 months.

• Entry at Buy Level #1 ($153.00): For a risk of $6.00, our first target reward is $12.00 and the second target reward is $27.00. This is a nearly 1:2 and 1:5 risk-reward trade.
• Entry at Buy Level #2 ($163.00): For a risk of $4.00, our first target reward is $7.00 and the second target reward is $17.00. This is a nearly 1:2 and 1:4 risk-reward trade.

In other words, this trade offers 2x to 5x more potential upside than downside.

Risks to Consider: The stock may reverse its overall trend if it breaks down from the near-term support level with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.

Recommended Bearish Trade (based on the chart)

In case the stock breaks down from the right shoulder of the IH&S Pattern with high volume, it would point to an upcoming short-term correction. In that case, below are the entry level, stop loss level, and target prices.

Sell Level: You can take short positions on ABNB below the price of around $139.00. This sell level is marked as a red color dotted line in the chart.

Important Note: Make sure that you only enter the trade once the daily close is below the recommended price level.

TP: Our target prices are $130 and $120 in the next 3-6 months.

SL: To limit risk, place a stop loss at $143.00. Note that this stop loss is on a closing basis.

Our target potential downside is 6.5% to 14% in the next 3-6 months.

For a risk of $4.00, our first target reward is $9.00 and the second target reward is $19.00. This is a nearly 1:2 and 1:5 risk-reward trade

In other words, this trade offers nearly 2x to 5x rewards compared to the risks.

Risks to Consider: The stock may reverse its overall trend if it breaks upwards with high volume. The breakout of the stock could be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.

Happy Trading!

— Trades of the Day Research Team

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