That being said, more and more countries are lifting their covid-19 travel restrictions as the world returns to normality. This should help easyJet shares rise throughout 2022. Is now the right time for me to buy some cheap shares? Or should I pass up on the UK airline giant? Let’s take a look.  

Trading updates

The firm’s latest results showed that for the three months to 31 December 2021, revenues rose to £805m, up from just £165m for the same period in 2020. This was to be expected, but it does highlight the large-scale recovery the firm has seen since the worst parts of the pandemic.

easyJet is appealing to customers who are looking for cheap budget holidays. And the airline has announced it will be releasing a number of such holidays in an effort to drive up occupancy of its planes. This should help drive up revenues in the near future and should prove popular as we approach the summer holiday season.

A final positive for easyJet shares is the global outlook for passenger traffic. As my fellow Fool Charlie Keough mentioned, global passenger volume is expected to reach 3.4bn in 2022. This is almost double the passenger numbers seen in 2020, which is great news for easyJet. With it offering cheap deals, it could set itself aside from the competition, capitalising on these large numbers.

Headwinds for easyJet shares

While there are certainly positives for the firm, there are also some big risks ahead of it. Firstly, the dreadful events linked to the Russia-Ukraine war have led to disruption and international travel uncertainty. In addition to this, the price of oil has skyrocketed to well over $100 a barrel. This will filter down into easyJet’s fuel costs, reducing margins and placing pressure on revenues. I struggle to see how the shares will climb in this uncertain landscape.

In order to mitigate this risk, easyJet has announced that it has 60% hedged fuel for the current financial year, ending 30 September 2022. While this gives me some confidence, rising fuel costs are still a big worry in my opinion.

What I’m doing now

While the current share price drop does offer me a chance to grab some cheap shares, I think the risks outweigh the positives for the firm. It has experienced encouraging results and is set to benefit from increased footfall. However, I can’t help but worry about rising fuel costs and international travel issues. In my eyes, easyJet shares will struggle to overcome these risks in the near future. As such, I won’t be adding the shares to my portfolio today.

The post easyJet shares fell over 7% yesterday: should I buy now? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Believing that a company’s value might explode this year sounds a bit ambitious given the funk markets are currently in. But as 2021 showed, it’s also achievable if I pick the right FTSE stocks and encounter a healthy dollop of luck.

Today, I’m focusing on one share that I think has the potential to perform better than most in 2022. It might not, of course, but I do think it’s possible.

A FTSE stock that’s ready to fly

Online travel operator On the Beach (LSE: OTB) probably wasn’t the stock some would expect me to talk about in these terms and I understand why. The Manchester-based business has endured a tough couple of years thanks to the pandemic. I won’t include any figures on trading here. Let’s just say they haven’t been great. 

Having said this, there are a few reasons why I think the shares could finally be ready to fly.

First, we appear to be entering the final stages of Covid-19. As confidence returns (and restrictions become a distant memory both at home and abroad), more of us will feel confident enough to start booking holidays. Goodness knows, the demand is there. Yes, that will take some time to filter through to OTB’s numbers, but analysts are already expecting earnings per share growth of 126% in FY23 (beginning this October). Growth that strong could light a fire under the share price.

Second, On the Beach’s asset-light business plan means it can be far more nimble than larger industry rivals. If it needs to prioritise marketing particular destinations to gain the full benefit of the post-pandemic recovery, it can do so quickly. To me, that gives it an advantage over its travel stock peers.

Third, On the Beach’s finances are arguably in a better state than other companies in the sector. In its annual report, it said it “enters the new financial year well-funded to successfully and sustainably grow market share“.

Clearly, the probability of On the Beach soaring in price depends greatly on it releasing better-than-expected updates. However, a sizeable gain is not unrealistic for a business of its size. As I write, OTB shares are worth less than half the value they hit in April 2018. The market cap at Friday’s close was £475m. While the past is no reliable guide to the future, it shows that in a travel-friendly world, the share price can be much higher.

Nothing’s guaranteed

But I’ve already mentioned that luck plays a role. Any stock that’s attractive on paper can perform disastrously events conspire against it. Another Covid-19 variant, industrial action, terrorism in a popular destination — all of these can dent holiday bookings. And that would keep OTB’s share price grounded.

Plus there’s the possibility the general market malaise we’ve seen in January may continue for longer than anyone expects. This will prove a drag on most share prices. This is why spreading my cash between quality growth stocks and funds is an essential part of my investing strategy.

Optimistic holder

Yet I do think there’s a real chance of On the Beach finally rewarding this patient, battle-scarred investor in 2022. Exploding in value in under a year is a challenge, but I think the odds might be turning in this FTSE stock’s favour.

It remains my favourite Covid-19 recovery play. 

The post I think this FTSE stock could explode in 2022 appeared first on The Twelfth Magpie.

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Paul Summers owns shares in On the Beach. The Motley Fool UK has recommended On The Beach. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

While IAG shares have fallen almost 12% in a year and 20% in the past 30 days, they jumped 8% last Monday. This was largely due to the Omicron virus concerns abating. These up and down price moves made me wonder whether now might be a good time to add IAG shares to my portfolio.

IAG valuation

First, looking at valuations, IAG shares actually look quite cheap to me right now. The firm’s pre-pandemic share price was well over 400p. Currently sitting at 142p, it’s trading with a price-to-sales (P/S) ratio of 1.77. This is lower than competitors Wizz Air and Ryanair, which are at 4 and 6.51 P/S ratios, respectively. This signals to me that the IAG share price may be relatively undervalued compared to its rivals.

In addition to this, CEO Luis Gallego has said he believes “a significant recovery is under way and our teams are working hard to capture every opportunity”. If transatlantic flight routes continue to improve, the firm expects to return to profitability by summer 2022. If the firm can deliver some profitable results, I would expect IAG shares to rise as a consequence.

The bear case for IAG shares

One thing that worries me about IAG is the continuing impact that Covid is having on the balance sheet. Forced to take on almost £4bn in debts, this could weigh the firm down moving forward. What’s more, IAG released disappointing 2021 Q3 results in early November. Passenger revenue fell 35% compared to the same period in 2020. In addition to this, borrowings increased 24%, adding to its heavy debt pile.

While the Omicron variant may be less harmful than previously expected, it’s still causing major delays to the reopening of global travel routes. For example, Austria announced a full lockdown on 19 November. It seems the global reopening of travel routes is going to be an uphill battle for the travel industry, and IAG shares will have to bear the brunt of that.

The Verdict

Don’t get me wrong, IAG shares do look cheap. However, I think this is for a reason. The firm’s poor results, coupled with looming Covid fears are a big red flag for me. I do think the beaten-down travel industry could be a good investment opportunity, but for me it’s too risky to touch at the moment. I would wait to see how IAG performs over the next six months before considering adding shares to my portfolio.

The post Should I buy IAG shares today? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Rolls-Royce (LSE: RR) shares were devastated by the pandemic, falling drastically from their pre-Covid level. However, in the last quarter, momentum seemed to have picked up for the firm, with the shares climbing to 144p during October.

This momentum quickly ended, however, with the announcement of the Omicron variant. The shares have slumped over 12% in the past 30 days as a consequence. Does this present me with a buying opportunity? Let’s take a closer look.

Rolls-Royce share price outlook

Rolls makes the majority of its money from servicing jet engines. As such, the constant travel bans have plagued share price growth. While things seemed to be easing, the Omicron variant has led to a resurgence in coronavirus regulations. Many long-haul flight routes have virtually halted. The bad news was felt across the travel industry, with IAG and EasyJet both seeing double-digit share price drops after the news broke. In addition to this, many analysts don’t expect the aviation industry to fully recover until 2024. If this is the case, it could place a lid on the future growth of Rolls-Royce shares.

However, the Omicron variant has also boosted government responses to the coronavirus. For example, in the UK Covid-19 booster jabs are now being rolled out at a much faster rate to combat the variant. With more and more of the UK population vaccinated, it’s likely that travel numbers will ultimately increase. This could help keep Rolls-Royce shares afloat.

I think the 2022 summer season could prove pivotal for the travel industry. If the sector can enjoy high capacity, then consumer sentiment may be restored. This could lead to more abundant travel throughout the latter half of 2022, speeding up recovery for the sector. This would be great news for Rolls-Royce shares. However, it’s contingent on governments tackling the virus effectively.

Economic problems

One thing that worries me about Rolls-Royce is the firm’s capital structure. It currently has over £4bn of debt on its balance sheet, largely from pandemic-linked loans to keep the firm afloat. The reason this worries me is tied to the direction of the UK economy. Inflation has been steadily creeping up of late, with UK consumer price inflation (CPI) hitting 3.8% over the past 12 months. This is almost double the UK’s target of 2%. Due to these high increases, many investors are expecting an increase in interest rates. If this occurred, it would add to Rolls’ debts.

In just over a week, Rolls will release a trading update. I think this will prove pivotal for the direction of Rolls-Royce shares. In addition to this, it will show investors if the recent addition of Anita Frew as a non-executive director might be making an impact. Frew has chaired multinational chemicals company Croda International for the last five years, delivering huge success. If the report contains some good results, I’d hope that Frew’s impact on Rolls’ management could lead to some great longer-term growth for the firm.

Overall, although Rolls-Royce shares do look cheap to me, I’m not confident enough to buy just yet. I’ll be waiting eagerly to see the firm’s trading update before I consider adding the stock to my portfolio.

The post Should I add Rolls-Royce shares to my portfolio today? appeared first on The Twelfth Magpie.

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Dylan Hood has no postition in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

easyJet announcement

Let’s begin by taking a closer look at the announcement from easyJet earlier this month. It contained several messages, but the one that caused the most talk among shareholders was the rights issue. Such rights issues often happen during crises with IAG and Rolls-Royce also being pandemic-linked examples. The large sell-off of easyJet shares reflects investors’ dampened views.

To add to the cash call, it also provided another shock to investors when announcing that it had received a takeover offer from an unnamed rival (widely reported to be Wizz Air). This may be one reason for the call to investors, as a cash injection would protect the firm from receiving lowball bids. The uncertainty created from this message is clearly not good. This puts me off from adding easyJet to my portfolio for the moment.

Yet news of a takeover also tempts me to buy some shares. I would expect that any form of takeover to have a positive impact on the easyJet share price. With the stock currently trading for around 630p (a fraction of pre-pandemic levels), this could be a great addition to my portfolio at the current price. 

Easing restrictions

An announcement by ministers that the latest string of measures to phase out travel restrictions was to come into action will no doubt further positively impact easyJet. After it was stated that the traffic light system was to be replaced, along with PCR tests being scrapped for double-jabbed travellers, it was clear we could expect to see a rise in the number of people jetting away on holiday in the near future. A rise in passenger numbers would put the firm partly back on track. In a winter period when many expected reduced travel, this could instead open the door for a rise in passenger numbers.

Will the rise continue?

The cash injection could be vital for easyJet’s future. This will go a long way to shoring up its balance sheet. As such, I think we could expect to see a rise in the easyJet share price for the remainder of this year. A takeover would also provide a boost. The risk for me is if a takeover doesn’t materialise. The firm has found itself being outpriced by competitor Wizz Air, and recently has fallen behind rival Ryanair. I think the share price may rise short term. Yet I think the road to recovery for easyJet is a difficult one to navigate. As such, I won’t be buying any shares for now.

The post Will the easyJet share price continue to rise? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The rights issue

Last week, easyJet announced that it would be raising around £1.2bn through the rights issue. Here, participants would be offered the chance to buy 31 shares for every 47 that they own, at a much-discounted price of 410p. This is the second rights issue that easyJet has launched since the pandemic, with the first one raising around £400m.

However, a rights issue is rarely good news for a company’s share price. This is because more shares are available on the market, and the stock price is therefore diluted. Due to the higher number of outstanding shares, valuation metrics such as book value per share and earnings per share, also decrease. Accordingly, it’s no surprise that the easyJet share price has fallen so significantly since this news.

But a rights issue is not just about bad news. In fact, from a long-term perspective, it’s hoped that this extra liquidity will allow the airline to expand its services and take advantage of investment opportunities. It should also help easyJet withstand the “potential prolonged market challenges”, especially if travel restrictions continue into 2022.

Other factors

Alongside the rights issue, shareholders have also had to deal with the news that it has been approached by a competitor for a potential buyout. The competitor is widely thought to be Wizz Air. Nonetheless, it was reported that it was a “low premium and highly conditional” all-share deal, which “significantly undervalued” the group. As such, the deal was rejected instantly. Even so, it refused to rule out any further M&A, either as a target or an acquirer. This may mean further bids for easyJet in the future, which may value the firm more highly. Hopefully, this would have a positive effect on the easyJet share price.

After reporting a headline loss of £835m in 2021, there are also signs that a recovery is in progress. In fact, the group expects capacity this quarter will be 60% of 2019 levels, up from 17% in Q3. There are equally signs that travel regulations in the UK will start to ease in the coming weeks, with Health Secretary Sajid Javid stating that he wants to remove the PCR test requirement for those entering the UK “as soon as [he] possibly can”. This will hopefully aid easyJet’s recovery.

What am I doing about easyJet shares?

I’m optimistic that the recovery is under way for easyJet. This should be aided by ever-increasing passenger numbers. But I’m not going to buy right now. This is because the rights issue means that easyJet will have almost 750m shares in issue, compared to just 397m before the pandemic. I’d like to see signs that the company is in a financial position to buy back some of these shares before I buy. 

The post The easyJet share price falls below 600p. Should I buy? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

IAG share price valuation

The IAG share price is currently sitting at 155p. It’s currently trading off of a price-to-sales (P/S) ratio of 1.63. This is significantly lower than competitors easyJet and Ryanair, who trade off P/S ratios of 4.15 and 9.54 respectively. This shows me that IAG stock may be undervalued at current prices.

A slightly worrying point is that the firm’s enterprise value (EV) has actually increased since before the pandemic. EV is calculated by adding together the firm’s market cap and net debt, showing how much someone would theoretically have to pay to buy the business outright. At the end of 2019, IAG’s enterprise value was about £16.5bn. Today it is just below £20bn. This signals the business is valued a lot higher than in 2019, even though flight numbers and revenues have decreased.

However, this does not worry me. The main reason this number has increased is because IAG added £3.8bn of debt to its balance sheet during the pandemic. This was a theme across most of the aviation industry, with easyJet also forced to take a £1.4bn debt package. TUI followed a similar path, finishing 2020 with over £6.5bn in net debt. The fact that all of these firms will have seen significant jumps in EV makes me believe that the IAG share price may still offer good value at current levels.

Pushing higher

IAG’s half-year results did show some encouraging numbers. Q2 passenger capacity was only 21% of 2019 levels, but this is expected to rise to 45% for Q3. In addition to this, IAG has a strong cash position of £8.5bn. Both of these numbers point towards a rising IAG share price in the near future.

However, many analysts have stated they don’t believe the aviation industry will fully recover until 2024. Many countries like the US, Australia, and New Zealand still have strict Covid-19 travel restrictions. As British Airways makes most of its business from long-haul flights, these continued restrictions are likely to stifle future growth. 

Overall, I think the IAG share price offers some good value at current levels. However, this doesn’t mean there is not further to fall. In a few years, I think we could see a good recovery and the IAG share price will be significantly higher than where it is now. In the short term though, I am not convinced this is a buying opportunity.

The post The IAG share price is falling: should I buy in now? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Impressive recovery

easyJet’s Q3 results offered investors some encouraging numbers. Costs fell to £34m per week, which actually outperformed the Q1 guidance of £40m. Although these costs may seem steep, the fact that the company is performing better than expectations is a great signal to investors of effective management. In addition to this, the firm has signalled Q4 capacity will be near 60% of its 2019 levels, as opposed to 17% in Q3, meaning revenues will start to increase again. Both of these metrics seem to point easyJet shares in the right direction.

Another notable point that could help easyJet and its share price move forward is the costs streamlining the pandemic has forced on the firm. A bold (albeit sad) move of cutting staff by 30% was initially met with industry criticism. However, it is a large part of the reason the firm was able to shrink its losses to £318m for Q3. Moving out of the pandemic, I expect easyJet to continue this effective cost management, which could drive future profit margins higher. This would be great news for easyJet shares.

Risks lie ahead

There are still some serious risks to easyJet shares. The constant uncertainty of the pandemic continues to haunt the travel industry and as my fellow Fool Charlie Keough highlighted, many analysts don’t expect the aviation industry to fully recover until 2024. Predictions like this are a big red flag for stocks like easyJet.

In addition to this, the shares have fallen almost 20% in the past six months, slowing down the momentum the stock gained in the tail end of 2020. It is a similar case with peers TUI, and IAG, which have seen their share prices tumble by 29% and 22% in the past six months, respectively. This negative market sentiment doesn’t place easyJet shares in a strong position, in my eyes.

A good time to buy easyJet shares?

I think the shares still have some challenges to face. Although cost management and flight capacity numbers are encouraging, there is still a long way to go before the firm is back to its pre-pandemic self. Broader market sentiment also seems to be negative, which isn’t great news for the firm. I sold my easyJet shares in March and am waiting until I have a clearer picture of the travel industry’s future before possibly adding them back in my portfolio.

The post Is now a good time to buy easyJet shares? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But since then, the company has been making a swift recovery and is now trading above pre-pandemic levels. Last week its climb continued to be just shy of a new three-year high. What’s causing this growth? And should I be adding the stock to my portfolio?

The rising Ryanair share price

One of the main contributing factors of Ryanair’s growing share price stems from the return of international travel. Lockdown restrictions and border closures were introduced last year to counter the spread of Covid-19. This ultimately led to the majority of flights being grounded.

With the vaccine rollout progressing relatively quickly both here in the UK and in America, planes are once again taking to the skies. Holiday travel for Britons is set to resume next week. And while the list of ‘green’ countries remains quite limited, it does include popular destinations such as Portugal, which Ryanair flies to.

What’s more, even without the imminent boost to business, the number of non-holiday flights is already back on the rise. In April alone, the company completed 8,000 trips transporting around a million passengers around the world. By comparison, only 40,000 passengers were flying a year before.

Needless to say, that’s quite a substantial recovery, especially since each aircraft is currently operating with a 70% carrying capacity. Therefore seeing the Ryanair share price climbing is not that surprising to me.

Looking ahead

As promising as I find these numbers, there are a few things that concern me. Ryanair is prominently a short-haul flight business operating within Europe. But the vast majority of its destinations still have significant travel restrictions in place due to high infection rates. As a result, the management team estimates that total passenger numbers for 2021 will be at the lower end of guidance.

This is particularly worrying as the vaccine rollout within Europe is still progressing relatively slowly. With a third wave of infections predicted to occur later this year, many of these countries could be moved from the ‘amber’ list to the ‘red’ list. And consequently, it would likely have a significant impact on the Ryanair share price.

The bottom line

These disruptions are ultimately short-term problems. And given the company has a large cash war chest of around €3.8bn (£3.3bn) with the additional capability of signing sale-leaseback agreements, its liquidity remains strong, in my opinion.

And so I think the Ryanair share price can continue to grow this year and over the long term. But having said that, this isn’t business I’d want to add to my portfolio. Looking back at its pre-pandemic financials, while revenue has continued to grow, its profit margins have suffered, resulting in a consistently contracting bottom line. Personally, I think there are far better businesses to own today.

The post Can the Ryanair share price continue to grow in 2021? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Ryanair. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Since then, some volatility has set in. On Tuesday, AirBnB stock was down to almost $120. Yesterday, it was trading near $140.

Should I be considering the company for my ISA or steering well clear? Let’s start with some positives. 

Why I like AirBnB stock 

According to its website, AirBnB has 5.6 million active listings in 100,000 cities worldwide. This clearly gives it far greater geographical diversification than even the most established global hotel firms. 

Then there’s the variety on offer. According to its website, AirBnB “offers 90,000 cabins, 40,000 farms, 24,000 tiny homes, 5,600 boats, 3,500 castles, 2,800 yurts, 2,600 treehouses, 1,600 private islands, 300 lighthouses, and 140 igloos“. Companies that have something for everyone tend to remain popular. 

And then there’s the brand itself. In my experience, the question “Did you AirBnB it?” is quickly becoming the travel equivalent of “Did you Google it?“. And we all know what’s happened to parent company Alphabet‘s valuation. 

On a purely anecdotal basis, I’ve also found the whole process of booking a place to stay on weekend city breaks easy, convenient, and strangely quite fun in itself.

Given the above, you might wonder why I haven’t bought the stock already.

Reasons to be wary

My first reason relates to valuation. For all the excitement that its IPO caused, AirBnB is still massively loss-making and likely to remain so for some time. With a current market cap of over $80bn, this simply can’t be ignored.

Tellingly, at least some analysts have already turned bearish on the company. Equity research firm Gordon Haskett believes AirBnB stock will likely underperform after such a strong start. I’m confident it won’t be the last.

Aside from the valuation, the fact that AirBnB is just one of the host of companies coming to market recently is worrying. A flurry of IPOs suggests founders believe market conditions won’t get much better.

Another, perhaps inevitable reason why I’m hesitating to buy is due to the uncertainty caused by the pandemic.

While the emergence of effective vaccines has been glorious news, it will still take a while before we can all remove our face masks. Moreover, many people, although desperate for a holiday, may still feel initially safer in hotels with strict hygiene rules. The psychological impact of the pandemic may persist for longer than we think. 

On top of this, I can’t discount the possibility of greater regulation on holiday rentals. 

Be patient

As a Foolish investor, I take a long term approach. My philosophy is simple: buy right and hold. I leave the risky stuff to traders. Right now, I’m placing AirBnB stock in the latter category.

A wobbly share price doesn’t make it a bad investment, of course. Anyone who remembers Facebook‘s 2012 IPO will know that it plunged in value shortly afterward. These days, it’s one of the biggest companies around!

Even so, I’m prepared to be patient. The time to buy will be when expectations are reset back to vaguely sensible levels.

In my view, AirBnB needs to come back down to earth.

The post Should I buy AirBnB stock for my ISA? appeared first on The Twelfth Magpie.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (C shares) and Facebook. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.