Breakingviews: Airbnb IPO price deserves more stars than DoorDash

For investors seeking long-term accommodation for their capital, Airbnb’s initial public offering looks a better choice than DoorDash’s. The two are seeking similar valuations in their upcoming IPOs: at the top of both companies’ initial indicated ranges, published this week, the home-sharing app would be worth $30 billion and the food-delivery firm $27 billion. Airbnb’s figure deserves more stars.

Through 2019, both companies were growing like weeds. Airbnb, though, largely financed its expansion without burning cash under Brian Chesky, the co-founder and chief executive. Cash flow from operations exceeded investment by over $500 million between 2011 and the end of 2019. The company didn’t skimp on investment either. Airbnb’s free cash flow fell from over $500 million in 2018 to about $100 million in 2019 as it expanded in China and spent heavily on technology.

DoorDash, meanwhile, has consistently burned capital. To be fair, in the first nine months of 2020 the company’s operations did generate more than $300 million of cash. Airbnb, on the other hand, burned over $500 million in the period. But this is hardly a sign that the two’s fortunes have shifted durably.

It’s difficult to think of a sector harder hit by Covid-19 than temporary accommodations, or one that has benefited more than take-out food delivery. The end is in sight however, as vaccines roll out over the next few quarters.

Airbnb’s revenue fell by about a third in the first nine months of 2020 compared to the prior year, to about $2.5 billion. In the full year of 2019, its top line was nearly $5 billion. That’s easily achievable again as soon as pent-up demand for travel can find an outlet. And the discipline forced on Chesky should have set the stage for focused, profitable growth.