1 Unstoppable Stock Down 43% to Buy Hand Over Fist, According to Wall Street

The investing world is enamored with artificial intelligence (AI). It seems like every stock deemed an AI "winner" is soaring to all-time highs, with trillions upon trillions of dollars in market value added to these stocks in the last two years. Not every AI stock is soaring, though.

Enter Airbnb (NASDAQ: ABNB). The online travel portal's stock is trading down 43% from all-time highs set in early 2021, even though the business continues to expand and should see increased opportunities and efficiencies from deploying AI tools. Wall Street has a consensus price target of $139 versus Airbnb's stock price of $123 (as of Oct. 15), but I think the stock is going much higher over the long term.

Here's why Airbnb is an unstoppable stock for investors to buy and hold for the next decade and beyond.

International expansion opportunities

For those living in the United States or other English-speaking markets, Airbnb may seem like a mature service. Last quarter, the platform generated $23.5 billion in gross booking spend from travelers, and now controls a sizable percentage of tourist lodging in these markets. The same cannot be said for non-English-speaking countries.

The majority of Airbnb's bookings today still come from its original markets, such as the United States. While North American demand is expected to steadily grow (nights booked grew in the low single digits year over year last quarter), management believes its opportunity for outsized growth over the next few years lies in new markets. Airbnb's presence in huge tourist areas such as Italy, Brazil, or Japan is tiny compared to its market share in North America, which it aims to fix in the coming years.

In order to take advantage of this opportunity, Airbnb is localizing its product and marketing for these specific countries, which is already bearing fruit in customer demand. For reference, we can look at Japan. Demand from local Japanese travelers on Airbnb accelerated last quarter, with a 15% year-over-year increase in first-time bookers. Getting new customers to try out Airbnb, download the app, and understand how the home-sharing service works is vital for expanding the brand.

If Airbnb can keep up this steady drumbeat of international expansion, it can drive solid bookings, revenue, and earnings growth over the next 10 years.

Expanding beyond the core (and AI)

Airbnb was founded back in 2007, making the business close to 20 years old. Even though it has a market cap of $76 billion, Airbnb is still driven by its original home-sharing idea.

Founder Brian Chesky aims to change that with recent product expansions. This year, Airbnb revamped its Experiences product and launched what it is calling Services for customers on Airbnb. Experiences are events such as tours or cooking classes for tourists to try out, while Services are add-ons a vacationer might want, such as a massage or a home chef. It is still experimental and in the early stages, but it is a logical next step for Airbnb to expand its platform.

What's more, Airbnb has a huge opportunity to improve its business by utilizing modern AI tools. This includes through its customer service chatbot to increase operational efficiency and improve profit margins, but also experimenting with AI search queries for customers looking to find a place to stay on vacation.

Next year, Airbnb is planning to bring AI into travel search. Most travelers on Airbnb begin their search on its mobile app or website, giving it a captive audience to deploy a language model.

Investors will not see these new products impact revenue growth for at least a few years, but Airbnb is setting the groundwork to increase its total addressable market over the long haul.

Data by YCharts.

Is Airbnb stock a buy?

When looking at Airbnb stock today, it is not trading at a demanding price. This is contrary to other technology or AI beneficiaries right now.

Using an enterprise value-to-EBIT ratio (earnings before interest and taxes), which encapsulates the net cash on its balance sheet and excludes non-operating interest income, Airbnb trades at a reasonable earnings multiple of 25. The company has an EBIT margin of 22.5%, a number that can expand over the long term because of the company's up-front investments into international expansion and new product categories.

Airbnb's revenue is growing 13% year over year, and is poised to continue growing in the double digits for years to come. EBIT margin can keep expanding. Plus, management is starting to return cash to shareholders with a stock buyback program, which will add more fuel to earnings per share (EPS) growth over the long term.

Take everything together, and Airbnb looks like an unstoppable stock for investors to buy at a discounted price today.

Brett Schafer 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.