Airbnb’s Stock: The Market’s Best-Kept Secret or Next Big Thing?
Airbnb’s stock has been nothing short of a rollercoaster ride for investors since its grand debut in December 2020. Picture this: an IPO at $68 per share, followed by an astonishing 223% surge in just over two months. It was like a rocket taking off, reaching for the stars. And on February 11, 2021, it did just that, hitting an all-time high of $219.94. But hold on tight because the plot thickens.
The performance since then? Well, it’s been a tale of ups and downs, twists and turns. From late February to mid-May, it felt like a suspenseful thriller that left investors with bated breath. But then, in July, just when you thought you had it all figured out, the stock pulled a surprising twist. It soared to new 52-week highs, signaling a bullish change in the narrative.
Fast forward to mid-August, and Citigroup decided to add a twist of its own. They raised their price target on ABNB stock from $135 to $160 while keeping a buy rating, leaving investors with a cliffhanger. And speaking of suspense, Airbnb’s entry into the prestigious S&P 500 added a dramatic twist to the story. The stock completed a third consecutive week of gains, leaving everyone guessing what happens next.
Now, let’s dive into the heart-pounding details. As seen in the weekly chart below, Airbnb took a daring leap, soaring 9.9% higher in weekly volume that surged 88% above its 10-week moving average. Even after the Federal Reserve decided to raise interest rates for the fourth time this year in late July, ABNB stood strong, holding onto solid gains since January 1st, despite a minor hiccup in its stock price.
But what about June? Oh, June was a thriller in its own right. ABNB stock rallied almost 17%, marking its most significant monthly gain since January. And just when you thought it couldn’t get any better, July came along, and shares bolted another 19% higher. But, of course, no thriller is complete without a plot twist. In August, the stock took a sudden turn, sliding more than 13%. Talk about a nail-biting cliffhanger.
So, here’s the million-dollar question: Is Airbnb stock a buy now? Or should those who’ve been on this rollercoaster ride cut their losses and exit the theater?
The Deep Dive
Let’s dig deeper into this gripping tale. We’re talking about a comprehensive analysis that covers everything from fundamentals to technical strength and even the drama of mutual fund ownership. All of these elements will be thrown into the mix, creating a recipe for success worthy of a blockbuster movie.
Earnings Drama
After the curtains closed on August 3, Airbnb revealed its second-quarter results. The numbers were nothing short of spectacular, with earnings skyrocketing by a jaw-dropping 75% compared to the previous year, reaching an impressive 98 cents per share. It was a standing ovation moment. This marked the fifth consecutive quarter of robust profit growth. But, as with any great story, there’s a twist. While earnings stole the spotlight, there was a subtle plot development in the revenue department. Sales increased by a respectable 18% to hit $2.48 billion. It’s good, but here’s the twist: the rate of revenue growth has been gradually slowing down.
In the December quarter of 2021, revenue was soaring at 78%, but it gradually decelerated to 70%, 58%, 29%, 24%, 20%, and 18% in the just-ended second quarter of 2023. It’s not exactly a cliffhanger, but it does keep you guessing. However, let’s not forget the thrilling subplot: total nights booked increased by a solid 11% to reach 115.1 million, even if it missed some consensus forecasts. And the surprise twist? Airbnb had initially forecasted a slight decline in the average daily rate of rentals on its platform. But instead, the daily rate edged up by 1% compared to the previous year and a whopping 42% compared to 2019 levels.
A Thrilling Stock Performance
Now, let’s talk stock performance. Earlier this year, Airbnb’s stock was the star of the show, and it hinted at a possible comeback story. In mid-February, ABNB stock reached nine-month highs, with a breathtaking 13% surge in heavy trading volume the day after the release of fourth-quarter results on February 14. At one point in February, ABNB stock came tantalizingly close to erasing half of the 138-point decline from its peak of $219.94.
But, as every great movie plot goes, there’s a twist. Shares experienced a temporary dip following the release of first-quarter results. On May 15, Airbnb’s stock hit a four-month low of $103.55. But here’s where it gets interesting. The stock not only managed to recover but also reclaimed both its 50-day moving average and its critical 200-day moving average, indicating strong technical resilience. ABNB’s 200-day moving average appears to have stabilized after a period of decline, suggesting a promising climax.
The Plot Thickens
Now, here’s the part that keeps you on the edge of your seat. Airbnb’s first-quarter earnings performance was nothing short of impressive, with earnings per share coming in at a robust 18 cents, surpassing the consensus estimate of 7 cents. Sales also displayed remarkable growth, rising by a solid 19.2% to reach $1.82 billion, well ahead of Wall Street’s estimate of $1.6 billion. It’s the kind of twist that leaves you wanting more.
But, of course, there’s another twist in this story. The company’s second-quarter revenue forecast of $2.35 billion to $2.45 billion, while slightly below expectations of $2.42 billion, still indicates a healthy growth rate of 12% to 16%. It’s the kind of tension that keeps you glued to the screen.
In its shareholder letter, Airbnb’s management celebrated several key milestones, including a 14% increase in adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to a record $262 million, free cash flow reaching $1.6 billion (up 32% year-over-year), gross bookings rising by an impressive 19% to reach $20.4 billion, and a total of 121.1 million nights and experiences booked, marking a remarkable 19% increase from the previous year. The company also noted an 18% growth in the supply of rooms and experiences, with the fastest growth occurring in North America and Latin America.
Regulatory Drama
But, what’s a gripping story without a few plot twists? Airbnb has faced its share of regulatory challenges and legal battles. For instance, in New York City, Airbnb and several of its hosts filed a lawsuit to challenge what they deemed “extreme and oppressive” registration requirements imposed by local authorities. These regulations, which came into effect in January and were set for enforcement in July, could potentially impact Airbnb’s operations in the city. The lawsuit argued that compliance with the complex regulations was nearly impossible for ordinary New Yorkers, with only nine out of 35,000 Airbnb.
