This 1 Stock Could Be the Biggest Winner of the 2022 Bear Market | The Motley Fool

This year has not been kind to investors. It seems like every asset has dropped dramatically, leaving investors with little place to hide. For those brave enough to jump in and start buying dips, Airbnb (ABNB 6.68%) could be one of the biggest winners in the aftermath of the current bear market.

The worldwide travel engine is thriving as people take long-delayed vacations. As some in the industry calls it, revenge tourism is on the rise after consumers were forced to stay indoors longer than they’d like. Meanwhile, shares of Airbnb are down 57% from its peak. The mismatch between its outlook and price can present investors with a great opportunity to capitalize on.

Revenue and cash flow are growing fast

Airbnb’s recovery from the downturn during the shutdown began in earnest in Q6 2021, when revenue grew 298 percent year-over-year. This momentum continued, growing 67%, 78% and 70% year-over-year over the next three quarters.

YCharts ABNB Revenue (Quarterly YoY Growth) data.

Airbnb’s business model puts it in a great position to thrive with increased travel demand. It does not own any listings on its platform. Instead, it encourages hosts to list places to stay on the site that are booked by people who want to travel. Airbnb receives a percentage of all transactions for its services. How does that help in times of high demand? Unlike the traditional hotel or resort business, it doesn’t need to make significant investments to build rooms to capitalize on growth.

Speaking of industry growth, spending on hotels and resorts fell by nearly $900 billion in 2020. Next year is better as widespread vaccinations make people more comfortable leaving their homes, but gains $340 billion still puts the industry significantly below pre-pandemic levels. That suggests there could be significant pent-up travel demand that could be unleashed throughout 2022.

ABNB's Money from Activity (Quarterly) Chart.

YCharts Money From Activity (Quarterly) ABNB Data.

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Airbnb’s soaring revenue has helped it drive cash flow from its business. The index rose to $1.2 billion in the most recent quarter ending in March, nearly double from $618 million in the same quarter a year ago. If its revenue continues to grow anywhere near its pace over the past few quarters, operating cash could continue to climb higher. And with demand in the industry still recovering from the pre-pandemic slump, it might be reasonable to assume Airbnb will continue to grow rapidly.

Great outlook at a bargain price

ABNB price on Free Cash Flow Chart.

ABNB price on YCharts Free Money Flow data.

While Airbnb’s outlook is improving as the economy reopens, its share price is falling. It is an opportunity for long-term investors. Trading with a price to free cash flow ratio of 21.6, Airbnb is said to be cheaper than ever. Excellent prospects with bargain valuations is why Airbnb could be one of the biggest winners of the 2022 bear market.

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