Turo: The Next Airbnb?

One of my favorite stocks is IAC Inc (IAC).

It’s a holding company with many different ownership stakes.

To value IAC, you need to do a sum-of-the-parts analysis (SOTP).

Investment cases built on SOTP valuations are tricky because you don’t know when/if value will ever be unlocked.

As such, they can be value traps.

But with IAC, we know value is going to be realized. It’s just a matter of time.

In its history, IAC has spun off 8 different companies.

The below chart is a little dated, but it speaks to IAC’s ability to create shareholder value over the long term.

One of IAC’s most valuable assets is its 31% stake in Turo.

Turo is a peer-to-peer car sharing company. Its business model is very similar to Airbnb’s but for cars.

School Vacation Week

Last week was April vacation week in Massachusetts so I flew to Florida with my wife and two kids for some beach time.

The plan was to fly into MIA and rent a car for the two hour drive down to Duck Key.

Instead of renting a car from Hertz or another traditional car rental company, I decided to use Turo.

To jump to the punch line, my experience was good, and going forward, I will use Turo instead of a traditional car rental company as long as the prices on Turo continue to be lower.

Turo Car Selection Process

The cool thing about Turo is you can select the exact car that you want.

I was looking for a mid size SUV that would be roomy enough for my family of 4 and luggage.

This is the car that I chose:

I read the reviews and knew that the host was reliable.

I was tempted to pick a Tesla but was concerned about it taking too long to charge upon return (in hindsight I probably could have returned it without recharging the battery).

How Much Did it Cost?

The advertised price was $40.75 per day or $163 for 4 days.

I don’t recall exactly what the equivalent car would have cost at Hertz, but I remember it looking significantly more expensive.

In the end, Turo added a bunch of fees which made it less of a bargain.

In total, I paid $353.66 to rent the car for 4 days (including $47 for gas).

Here is the breakdown of charges:

Next time I use Turo, I’m going to pay closer attention to the all in cost vs. what the equivalent cost would be at a traditional car rental company.

The Pick Up and Drop Off Process

The pick up process was actually pretty cool.

The host parks the car in a garage closest to your terminal and shares the location of the car with you through the Turo app.

The car key and a parking ticket is in a lock box that is attached to the car window. The lockbox looks like this:

The host shares the code to open the lockbox through the Turo app.

Once you open the lockbox, you can access the key and parking ticket to exit the garage. You pay the parking ticket upon exit ($25) and you are off.

Unfortunately, we had a slight hiccup…

The host forgot to leave the car key in the lock box. Ooops!

The good news is that I called the host, and he returned within 30 minutes to deliver the key.

This was an honest mistake but was not ideal to have to wait an extra 30 minutes outside the car with two sleep deprived/cranky kids (we had gotten up at 4am to make our flight).

Drop Off Process

The drop off process was equally easy.

I parked the car in the garage closest to my terminal, put the car key and parking ticket in the lockbox, and shared the car’s location with the host.

And I was done!

I meant to fill up the car with gas, but timing for our flight was a little tight so I opted to reimburse the host for gas plus a $10 convenience fee (well worth it!).

Turo Rental Summary

I had a good experience and will use Turo again.

How much is Turo worth?

IAC owns 31% of Turo and has a warrant to buy 10% more of Turo at a $2BN valuation.

IAC originally invested in Turo at a $250MM valuation, buying 25% of the company. Since then, IAC has added to its position most recently by buying a 3.5% position in the secondary market at an implied valuation of $3.0BN.

If that price is reasonable, Turo’s 31% stake is worth $918MM. Its warrant is worth another $96MM.

What could Turo be worth?

Turo generated $879MM of net revenue in 2023. As such, a $3BN valuation implies an EV/ TTM Revenue multiple of 3.4x.

Airbnb currently trades at 9.6x LTM revenue.

I’m not suggesting that TURO will trade inline with Airbnb, but there is definitely multiple expansion potential, especially if the IPO gets hyped.

What is IAC worth?

By my math, IAC is worth $83, a significant premium to where the stock currently trades.

Here is my latest SOTP valuation: