Airbnb Q3 Earnings: Will Travel Industry Recovery Finally Catapult Stock Higher?

  • Airbnb enjoyed post-IPO growth but faced a downturn due to COVID-19
  • The upcoming Q3 results are crucial for the company after a recent decline in shares
  • Analysts have optimistic forecasts for Q3, but stock performance will depend on earnings and the turnaround of the travel industry.

Airbnb (NASDAQ: ABNB) made its debut on Nasdaq in December 2020 and experienced a remarkable increase in its share price just before the outbreak of COVID-19. Airbnb’s appeal as a post-IPO stock has sparked increased demand, propelling its share price to nearly $220 in the first two months of 2021, representing an impressive 50% gain from its opening price of $146.

However, the tide quickly turned in March 2021 when COVID-19 was declared a pandemic, resulting in a substantial downturn for Airbnb as the travel industry came to a standstill. The stock fell below its IPO opening price, erasing previous gains. Throughout 2021, it maintained a sideways trajectory amid the ongoing pandemic, but transitioned into a downward trend in the second half of 2022.

h2 Airbnb Shares Punished Profits Despite Revenue Growth/h2

The recovery that began in 2023 will extend until July, supported by positive developments in the travel industry. However, over the past three months, Airbnb’s stock has been on a downward trajectory, instilling a negative outlook as the company approaches the release of its Q3 results scheduled for November 1.

In the previous quarter, announced in August, Airbnb reported earnings per share of $0.98, beating expectations by nearly 25%. Quarterly earnings also slightly exceeded the projections set by InvestingPro, which amounted to $2.48 billion.

Despite growing profits for five consecutive quarters, investors seem to penalize the company for its slow growth. While the gross profit margin sustained an annual increase of 75%, the current deceleration in sales, despite an increase of 18%, is a matter of significant concern, especially for a company like Airbnb, which is typically perceived as a growth stock.

Source: InvestingPro

For 2023, after the announcement of the quarterly results, it is evident that the stock is trading with a bearish bias, which indicates that investors are very influenced by the financial performance of the company.

This is exemplified by corrections after the financial results published in May and August. However, after the May pullback, the stock reached a high of $155 in late July on speculation of inclusion in the S&P 500, driven by summer activity in the sector of travel

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Airbnb’s Q3 earnings report could introduce volatility into the stock price. Analysts are relatively optimistic about the last quarter, with estimates that suggest an earnings per share of $ 2.15 for Q3.

The analyst consensus view increased by 21%, from $1.71 to $2.15, according to the latest update. The revenue forecast for the quarter is $3.36 billion, which indicates 15% year-over-year growth, but which highlights the expectation of a continued deceleration in revenue growth.

Source: InvestingPro

While the slowdown in growth is expected to affect profitability in the forecasts for the coming periods, a decrease in EPS is expected for Q4 and the first quarter of 2024. However, analysts predict that the profitability will recover towards the summer months.

While a similar decline is expected in the company’s revenues in the next 6 months, an increase is expected during the periods when the travel industry will accelerate again.

Source: InvestingPro

h2 Airbnb faces fierce competition/h2

In addition to its services in the United States, Airbnb, together with its subsidiaries, offers a pioneering intermediary activity that allows hosts to offer accommodation to tourists around the world. However, as this short-term housing model has become popular, the number of competitors has increased considerably.

This can be seen as one of the factors hindering the growth of Airbnb. So much so that even the big hotel chains were not indifferent to the growth in this sector and began to rent properties similar to the Airbnb model in addition to standard accommodation services.

When we compare Airbnb with peer companies on InvestingPro, it can be seen that the company has better performance in almost all key financial items.

While ABNB’s price/earnings ratio is currently 32.4x, the fact that it remains high compared to the sector and companies seems to give the impression that the stock is overvalued, while the price/book value of 14.8x is a report supporting this assessment. .

Among other prominent ratios, the return on equity (ROE) for the last 5 years constitutes a negative to show that the company cannot use its equity efficiently without generating profit. However, the fact that annual profit items continue to be above the companies seems to maintain optimistic future expectations.

Source: InvestingPro

Through InvestingPro, we can also reach summary conclusions about the overall outlook of a company. Accordingly, the positive inferences in the InvestingPro summary for Airbnb stand out as follows:

  • The company’s cash is above its debt
  • Steady increase in earnings per share (EPS)
  • Analysts have revised their expectations upwards
  • High gross margins
  • The low F/S ratio compared to short-term profit growth

On the other hand, the fact that Airbnb is a company that does not pay dividends is seen as a negative for long-term investors, while the downward trend of the shares since September remains a question. However, given the potential for the stock to move more volatile than the market with a beta of 1.2, it also reveals that there is a possibility of a faster recovery in a possible comeback.

While this inference remains valid in a downward trend, depending on the current price movement, Airbnb can be considered a riskier asset in the index.

Source: InvestingPro

The fair value analysis for ABNB shares, which is trading at $116 today, reveals that the possibility of a recovery is on the table. So much so that according to the 12 InvestingPro model, the fair value was calculated at $ 135. This shows that the stock remains 16% discounted according to this fundamental analysis. The average estimate of 34 analysts points to $142, higher than the fair value analysis.

Finally, we analyze the financial health of Airbnb according to the InvestingPro summary and try to identify the current support and resistance levels of the share price.

Source: InvestingPro

The current financial health of Airbnb has a good performance with a score of 3 out of 5. The items that increase the average are the growth and profitability, while the cash flow continues at the average value. The price momentum of the ABNB is dragging the performance due to the pullback in recent months, while the relative value is also among the items that need to be improved.

h2 ABNB Stock: Technical View/h2

Technically, it can be seen that the share of the ABNB continues its trend with a higher and lower pattern of bottom formation in its fluctuating course in 2023. Based on the downward trend originating in November 2021, it is from note that the 2023 trend has turned from the ideal. correction trend to 160 dollars.

In the current situation, if the ABNB manages to maintain the average support of $110 and can see a weekend above this price level, it can turn its direction in the last quarter of the year as a continuation of the high peak – the low bottom model. .

In this case, we can see that the next local peak of the stock could be in the range of 170 – 180 dollars. On the other hand, if the critical support point of $100 below $110 is broken, the current pattern will become invalid.

As a result, the downward trend is likely to extend towards the band of $ 80. However, according to the current outlook and expectations for the Q3 announcement to be announced, the stock seems more likely to return its direction


Disclaimer: The author does not own any of these shares. This content, which is prepared for purely educational purposes, cannot be considered as investment advice.

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