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Portfolio Analysis and Valuation of Airbnb and Competitors

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Introduction - Portfolio Analysis of Airbnb and Travel Competitors

1: Task 5

Question 1:

In order to evaluate the portfolio analysis and valuation for Airbnb, the selected competitors include Expedia and Tripadvisor. The subsequent market capitalization to revenue valuation for Tripadvisor for the financial year 2018-19 was calculated as roughly 20% (spglobal.com, 2019). The market capitalisation to revenue valuation for Expedia for the financial year of 2018-2019 was calculated as 17%. Therefore, it can be said that Expedia owned a larger market capitalization and revenue valuation for the fiscal period of 2018-2019, in comparison to Tripadvisor. The valuation of Airbnb for the financial year of 2018-19 was stipulated at $ 20 million, while a rough estimation of 40% growth share in the market was attributed in the same financial year. The market valuation for Airbnb in the next financial year of 2019-2020 was expected to rise slightly as significant changes in the working paradigm were slated to affect the IPO performance in a highly influential manner.

Question 2:

The adjusted closing price of the shares for Airbnb on the first day of trading was calculated as $ 144.71. The total number of shares traded on the first day of trading on 10th December 2020 was measured as 70,447,500 shares (investor.spglobal.com, 2022). The price per share for Airbnb on that particular date was attributed to a numerical figure of $68. Hence, it can be stated that the share prices were being overvalued by an overall percentage of nearly 108%. An overvalued share possesses a high degree of shares of Airbnb being sold shortly to arrive at parity with the financial performance in the capital markets.

2: Task 6

Question 1a:

Stock Standard Deviation
J Sainsbury 3.084731968
Shell 154.6865047
JD Sports 60.15157471
SSE 52.51751071
NatWest 0.741601929
FTSE 407.2795914

Table 1: Calculation of Standard Deviation

(Source: Created by Learner)

Question 1b:

Stock Standard Deviation Variance Beta
J Sainsbury 3.084731968 9.515571316 32.42%
Shell 154.6865047 23927.91472 0.65%
JD Sports 60.15157471 3618.21194 1.66%
SSE 52.51751071 2758.088931 1.90%
NatWest 0.741601929 0.549973421 134.84%
FTSE 407.2795914 165876.6656 0.25%

Table 2: Calculation of Beta

(Source: Created by Learner)

Question 1c:

Stock Standard Deviation Variance Beta Expected Return
J Sainsbury 3.084731968 9.515571316 32.42% 2.95%
Shell 154.6865047 23927.91472 0.65% 1.04%
JD Sports 60.15157471 3618.21194 1.66% 1.10%
SSE 52.51751071 2758.088931 1.90% 1.11%
NatWest 0.741601929 0.549973421 134.84% 9.09%
FTSE 407.2795914 165876.6656 0.25% 1.01%

Table 3: Calculation of Expected Return

(Source: Created by Learner)

Question 2:

Correlation between Variables
Stocks Correlation
FTSE and Sainsbury -0.369281152
FTSE and Shell -0.345092161
FTSE and JD Sports -0.335456616
FTSE and SSE -0.338252065
FTSE and NatWest 0.188827926

Table 4: Calculation of Correlation

(Source: Created by Learner)

Question 3:

In order to further diversify the stocks and portfolio management of the investor, it is recommended for her to invest in two more banking oriented stocks. The two banking oriented stocks could be HSBC and Banco Santander, as the possibilities of a higher expected return remain optimistic. However, the potential of risks should also be considered, as financial stocks are prone to volatility as well as suitable pooling can also lead to portfolio diversification and risk aversion.

3: Task 7

Question 1:

The relevance and appropriate significance of asymmetric information for consumers in the financial industry is mostly attributed to the inappropriate Usage of Client Assets by companies. The inappropriate usage of client assets can be further classified as financial tactics being implemented by portfolio management companies to wrongfully utilise assets and holdings of clients in an unregulated manner. As per illustrations of Pisinger, Godtfredsen and Bender (2019), the inappropriate usage of client assets is mostly conducted by companies to cover their perennial losses that occur due to trading activities in the capital and money market. This further leads to the rise in conflict of interests as prior approval for usage of customer assets was not considered by the companies as well as brokers.

The importance related to the conflict of interests for brokers can be further classified as an inappropriate need by the brokers to maximise their financial benefits without considering the financial obligations of investors. Hence, the provision for seeking suitable client advice by the broking firms remains unstable and irrelevant owing to the adverse propositions being enforced on the clients. Moreover, the market position is at significant risk as it can largely lead to destabilising market and revenue losses.

Question 2:

The globalisation of financial services is considered a significant step for investors to suitably comply with the prescribed regulations required to be followed in the stock market. The globalisation of financial services further allows multiple nations to possibly establish trading relations for facilitating the demand mechanisms and supply services between buyers, investors and sellers in the financial and capital markets. As per illustrations and narrations of Bohn, Brakman and Dietzenbacher (2018), business organisations in the modern regime need to expand the wavelength of their businesses to attain favourable prospects in the markets. However, this leads to a steep rise in the increased competitive nature of the markets, leading to a tight tussle between regulators, investors and other key players. Hence, the possibility of investors understanding the various nuances of the markets is highly possible beforehand leading to the uncalled access to acquire a high percentage of investment opportunities in the money and capital markets in overseas countries. 

The globalisation of financial markets further leads to large-scale disarray among the regulators due to the perennial risks caused by the contagion risks. The nature and specifications of the contagion risk further consider the spillage of risks in the entire money and capital market caused by certain financial factors. These financial factors can include the large debt liabilities possessed by the banks of foreign countries, which has a domino effect on the entire market. Paskaleva and Stoykovva (2021), further explained and opined that the regulators are highly prone to volatilities and hostilities in the market as financial crunch and financial disparities are bound to occur. Moreover, the rapid spread of globalisation in the financial markets for regulators is considered to be a bane considering the uncertainty related to the covid-19 virus, which has significantly altered the aesthetics of the financial and money markets.

4: Task 8:

The problem mentioned in the provided case study is largely attributed to the highly influential status of M. Eisner in Disney's operational and corporate structure. Therefore, Mr Eisner being an influential shareholder for Disney has slowly started to crawl his influence in the Board of directors’ position leading to the conflict of interests in Disney. This is further classified as a problem related to the agency theory, in which the agent Mr Eisner is possessing powers that are equivalent to a principal. According to Vitolla, Raimo and Rubino (2020), the necessary suggestions required to be undertaken by the managing board or committee of Disney should emphasise the process of decentralisation for ensuring that total power does not remain irrelevant.

Moreover, being a capable shareholder of Disney, it is important to outline that one shareholder cannot hold a key position on the board as it can lead to disharmony in the managerial structure of Disney and lead to a large-scale professional conflict. As per the suggestions of Reim, Sjödin, and Parida (2018), the facilitation of decentralisation is further necessary as it leads to prompt and faster decision-making skills within the organisation and keeps pace with business activities without any major professional hindrances.

References

Journals

Bohn, T., Brakman, S. and Dietzenbacher, E., 2018. The role of services in globalisation. The World Economy, 41(10), pp.2732-2749.

Paskaleva, M. and Stoykova, A., 2021. Globalization effects on contagion risks in financial markets. Ekonomicko-manazerske spektrum, 15(1), pp.38-54.

Pisinger, C., Godtfredsen, N. and Bender, A.M., 2019. A conflict of interest is strongly associated with tobacco industry–favourable results, indicating no harm of e-cigarettes. Preventive medicine, 119, pp.124-131.

Reim, W., Sjödin, D. and Parida, V., 2018. Mitigating adverse customer behaviour for product-service system provision: An agency theory perspective. Industrial Marketing Management, 74, pp.150-161.

Vitolla, F., Raimo, N. and Rubino, M., 2020. Board characteristics and integrated reporting quality: an agency theory perspective. Corporate Social Responsibility and Environmental Management, 27(2), pp.1152-1163.

Websites

investor.spglobal.com, 2022, Stock Pricing [online], Available at: https://investor.spglobal.com/investor-relations-overview/ [Accessed on: 21.05.2022]

spglobal.com, 2022, Market Capitalisation [online], Available at: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/in-weaker-post-wework-ipo-market-uncertainty-for-airbnb-54848072 [Accessed on: 21.05.2022]

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