This groundbreaking tech stock just went on sale. Here’s why I’m buying more of it.

Airbnb (NASDAQ: ABNB) is one of the biggest disruptors of the mobile era. The company transformed the hotel and lodging industry by essentially reinventing the short-term lodging category.

Although Airbnb has become a formidable player in the accommodation industry, its stock has not always been a winner, as the company faces a number of risks from regulators, increasing competition from traditional online travel agencies such as Reservation Holdingsand the variability inherent in a cyclical industry such as tourism.

That vulnerability was evident in the second-quarter earnings report, when shares fell 17% in after-hours trading, hitting their lowest point in over a year. Let’s analyze the earnings report before discussing why the sell-off offers investors a good buying opportunity.

Travel recovery is weakening

Airbnb’s momentum from the recent travel boom appears to be fading. Competitors like Booking have already seen their growth slow down. The home-sharing leader posted an 11% increase in revenue to $2.75 billion, but that was the slowest growth in at least two years, though it narrowly beat estimates.

Ultimately, growth was more moderate. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 9% to $894 million, while net income declined due to an increase in income taxes due to the write-down exemption, an increase in stock-based compensation, and sales and marketing expenses that weighed on earnings. On a generally accepted accounting principles (GAAP) basis, earnings per share fell from $0.98 to $0.86, below estimates of $0.91.

Management also said booking times are getting shorter, a sign that budgets may be getting tighter and travelers are becoming more selective about where they travel. Finally, the company pointed to a slowdown in U.S. demand, which also seemed to be weighing on the stock.

For the third quarter, management forecast revenue growth of 8% to 10% to a range of $3.67 billion to $3.73 billion, below estimates of $3.84 billion. The company also forecast flat EBITDA growth due to continued investments in marketing.

Airbnb shares go on sale

If the after-hours sell-off continues, Airbnb stock will be as cheap as it’s ever been. Its market cap will fall to $70 billion, but the company just reported $4.3 billion in free cash flow. On a free cash flow basis, the stock is trading at a multiple of just 16. The company earned $3.9 billion in EBITDA, giving it an EBITDA multiple of just 18, which again seems like a great price for a company with the growth potential of Airbnb.

The story continues

Airbnb is also continuing to buy back shares, which will become easier as the share price falls and will act as a natural driver of share appreciation.

The future looks bright

Airbnb still has a huge market to cover, and the company sees a huge opportunity in raising penetration rates in countries like Japan, Spain and Italy to match those in its most mature markets, the U.S., U.K., France, Canada and Australia.

CEO Brian Chesky intends to expand Airbnb’s business to include new verticals such as long-term contracts, guest services and host services, and said the company will introduce new products around those businesses in 2025. He said during a financial results conference call:

In other words, Airbnb’s target market is expected to grow significantly in the coming years.

Why Buy Airbnb

While the pullback is understandable, Airbnb’s competitive advantages remain intact and the growth opportunity remains huge. With a cash flow multiple of just 16, the price also looks great. Investors can count on long-term growth in the travel industry, especially as its popularity continues to grow.

Is it worth investing $1,000 in Airbnb right now?

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Jeremy Bowman holds positions at Airbnb. The Motley Fool holds positions at and recommends Airbnb and Booking Holdings. The Motley Fool has a disclosure policy.

This Breakthrough Tech Stock Just Hit the Sale. Here’s Why I’m Buying More of It was originally published by The Motley Fool