Airbnb Is in the Spotlight for All the Right Reasons. Here's Why It's a Buy Now.

Airbnb (NASDAQ: ABNB) is a leading enterprise that was propelled by the mobile internet wave. Consequently, it's viewed as a major success story in the technology space, thanks to its disruption of the hospitality industry.

This business is always in the spotlight. That attention is warranted. And investors should take a closer look at Airbnb.

Here are three reasons why this travel stock is a smart buy right now.

Image source: The Motley Fool.

There's a durable competitive advantage

With 5.5 million hosts listing 9 million properties worldwide and 2.5 billion all-time guest arrivals, Airbnb has built a massive two-sided network effect. This setup makes the business incredibly difficult to disrupt. And the platform is positioned to boost its value proposition over time, as the number of hosts/listings and bookings increases.

Airbnb's brand has also become a key contributor to its success. The company name is so widely recognized that it's used interchangeably as a verb. This is a clear indicator of the mindshare Airbnb has among travelers and hosts.

This shows up in the data. According to the S-1 filing, direct and unpaid channels represented a whopping 91% of traffic that came to the site in the first nine months of 2020. I suspect this trend is still true today. This is tremendous brand awareness that can support lower marketing expenses.

Innovation is a strategic priority

Last summer, Airbnb refreshed its platform to include experiences and services. The leadership team's goal is clear, which is to make this a comprehensive travel tool.

The innovation pipeline is still robust. In May, the business introduced new services like car rentals and airport pickups. And it launched new experiences, such as behind-the-scenes access to chefs and expert-led landmark tours.

As a tech-forward company, it's no surprise that Airbnb is leaning into artificial intelligence capabilities. This technology is already being used to improve customer support and to highlight reviews based on what travelers care about most.

At the end of the day, Airbnb's success is a direct result of its intense focus on improving the experience for both hosts and guests.

Value is what you get

Investors might be surprised to learn that this stock has been basically flat over the past five years. However, the next half-decade could be much better.

The stock's valuation is compelling. Airbnb trades at a forward price-to-earnings ratio of 26.9. On the one hand, this is a notable premium to the S&P 500 index.

But the upside is meaningful. According to consensus analyst estimates, Airbnb's diluted earnings per share will grow at a compound annual rate of 21% from 2025 to 2028. This is exactly the tailwind that can reward investors in the coming years.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb. The Motley Fool has a disclosure policy.