Airbnb is performing well with strong growth and AI initiatives, but its high valuation (above 50x earnings) poses a risk of underperformance, as historical data shows negative returns for such stocks.

One of the big lagards all this time finally caught a bid and it is uh Airbnb and this is a company whose product I will never use. I will not stay in someone's home. I don't judge anyone for wanting to do that. I will never let somebody stay in my home.

Airbnb is kind of killing it right now. huge upgrade from Bernstein after their latest earnings report which was earlier in August. This is what we call a runaway gap. Runaway gap, not a breakaway gap.

A runaway gap happens in the middle of a move. And this is like Edwards and McGee stuff, but basically you would take the the amount of the move that preceded it and then on the other side that's how far you should expect this to be able to keep running before it runs out of steam. So these are very bullish.

this thing gapped up and never even looked back at that gap level. management is now guiding to a fifth consecutive quarter of 10% or higher growth in in usage.

Bernstein came out and put a $217 target on the stock. They're looking at double-digit revenue growth, margin expansion, ongoing buybacks, and they think they're going to get 20% annual earnings per share growth um, going forward.

They're also talking that this is an AI stock, which I thought was interesting. Airbnb is using a ton of AI. They have an awesome CEO, Brian Chesy. He knows what he's doing.

rebuilding its search and discovery layer to better match guests to listings they're likely to book rather than just returning results based on proximity, which is how this thing used to work.

surfacing the right home for the right traveler at the right time, increasing conversion rates. Dynamic pricing tools. Are they charging the right amount? Probably not. Nobody is.

AI helps you get to the highest price somebody will pay without abandoning their shopping cart.

We've seen them do this in the concert business. We've seen the airlines do this. Sponsored listings, an emerging advertising products where product where hosts can pay to appear in search results.

High margin revenue stream that sits on top of the core take rate. AI is central to making the auction and placement logic work.

the loyalty program expanding AI personalization to make more loyalty offers and rewards and target them better. This is what Meta does. um they're the best in the world at it.

But seeing Airbnb utilizing AI to start putting up 20% growth, this these are the types of stocks that I personally am most interested in.

This is a pretty boring business. It's lodging, but supercharging the existing business with AI, I think, is how the S&P could have multiple bull market years ahead of it.

The biggest problem for Airbnb, the biggest problem was when it came public. Airbnb came public in December 2020. It was unprofitable right at the top. It was trading at 40 times sales and that is it.

It took six years to grow its way out of that hole. he says it's hard to overcome a high starting multiple even when future growth is robust.

So, when you're trading above 50 times, and what is this earnings, okay? When you're trading above 50 times, look at the five-year kagger. Even when you're growing between 15 to 20%, the average is -2%.

And this is very tricky. This is very, very tricky.

The reason why those companies get rewarded with such a high multiple is precisely because the earnings growth is so explosive. And so expectations get ahead of itself, right? And it takes Airbnb six freaking years to burn that excess off.