Airbnb’s (ABNB), stock has experienced a steep decline in recent weeks due to the continued concerns over the state of the travel industry. The stock price has fallen by more than 24% since its peak this year. This means that the company is now in a bear market, as investors begin to focus on its quarterly financial results.
Revenge travel boom fades
The relatively poor financial results of companies such as Marriott, Delta Air Lines, Delta Air Lines, EasyJet and Ryanair are evidence that revenge travel is on its way out.
People who spent a lot of money on travel after COVID-19’s lockdowns are said to be committing revenge travel. The trend is now being replaced by normalised travel. Recent data shows that revenue per room available (revPAR), for the first since the end of the pandemic, dropped in March.
Airbnb’s stock has dropped because investors believe that revenue growth this year will be moderate. Airbnb stock price has also dropped as investors are concerned about the competition within its sector, with companies such Booking and Expedia gaining market share.
Airbnb continues to grow, but there are still challenges
Airbnb, the leader in vacation rentals, has begun to slow down. The company’s most recent financial report showed that revenues increased by 18% year-over-year in the first quarter, to $2.1 billion. Airbnb has a history of achieving YoY growth rates exceeding 25%.
Other metrics confirm that the growth is slowing. The gross bookings rose by 12 percent to $22.9 billion, while the nights booked and experiences purchased rose by 9 percent.
Positively, management focused its attention on a profitable growth of net income which grew by 126% and reached over $264 millions. The growth in revenue was mainly due to the higher interest income. Interest income grew to $202 millions, as the company holds $7.8 billion of cash equivalents in addition to $3.2 billion of short-term investments.
Airbnb’s interest net income will likely be affected by the forthcoming interest rate reductions . Low rates will likely also benefit the company as they encourage travel in the US.
Airbnb investors are also concerned about the stock-based compensation of its employees, as it has been increasing, resulting in a dilution. This trend is expected to continue this year, and the company estimates that there will be a 20% increase in compensation this year compared with 2023.
ABNB Earnings ahead
Airbnb’s financial results, scheduled for next Wednesday, will provide the most significant news. The results of the financial report will show whether Airbnb has seen the same normalization in travel as other companies experienced over the last few months.
Airbnb’s business is said to have continued slowing down in the past quarter. Analysts expect the company to generate revenue of $2.74 billion in the next quarter, which is a 13 percent increase over the previous period.
Analysts expect its revenue to rise by 21% from the previous year, reaching $11.2 billion. The quarterly earnings per share are expected to be 91 cents. This is down from the 98 cents it was a year ago.
Airbnb is known for consistently beating analyst estimates, and this trend may continue into the current quarter. The results of these tests will give more insight into the effect on the current Paris Olympic Games. The company stated in a note that the number of bookings for Paris was up 400%. This is not surprising, since many people had traveled there.
The Airbnb value and the opportunities that lie ahead
I think that, despite its current challenges, the company can grow, even if it does so at a lower rate.
Airbnb has seen its annual revenue rise from $4.8 billion to $9.9 in 2023. As mentioned earlier, this could be over $11.5 in 2019. This is still a lot of sales for a 16-year old company.
It is the global leader of the sector. VRBO is owned by Expedia Group and has less than 2% of the market. Airbnb’s market share is believed to be over 30%.
Airbnb is also a bargain, as its trailing 12-month P/E ratio stands at 17, which is lower than S&P’s average 20.
Stock price Analysis of Airbnb
The ABNB stock price is clearly in a bearish trend on the daily chart. The company’s share price dropped after it formed an ascending wedge pattern.
Stocks have also fallen below their 200-day average and 50-day average, and are about to show a death-cross pattern. The Relative Strength Index and Relative Vigor Index have both pointed down.
The stock is likely to continue dropping as the sellers aim for the main support of $115. The stock is likely to bounce back in the future.
The ICD published this article: Airbnb Stock Drops As Revenge Travel Boom Fades Ahead of Earnings.
