Airbnb ABNB shares have jumped 11.9% over the past month. This performance has significantly outpaced the Zacks Internet-Content industry, the broader sector and the S&P 500's returns of 6.9%, 8.2% and 5.4%, respectively.
The company is riding on its strong core business, strategic investments and expanding global footprint. Solid momentum in its marketplace, which connects hosts and guests online, and strong listings on its platform are helping it grow in urban and non-urban areas. It is worth mentioning that Airbnb has more than 7.7 million listings on its platform across 100,000 cities in almost every country and region across the globe.
One-Month Price Performance
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Strong Investments Drive ABNB’s Prospects
Airbnb’s continuous investments in its key areas bode well for its long-term prospects.
Investments to grow the size and quality of the host community remain noteworthy. The company is expanding use cases and supporting various kinds of hosts (the ones who share their homes with guests) to attract more hosts globally to its platform. The move will help hosts deliver high-quality stays and experiences for guests. Airbnb is also raising awareness around hosting to make it easier for hosts to get started.
ABNB’s efforts to boost the quality of listings on its platform are benefiting its hosting business. The company’s initiative to remove several listings that failed to meet guests' expectations is a major positive. In second-quarter 2024, it removed 200,000 such listings to deliver enhanced stay experiences. With these efforts, the company strives to make hosting mainstream.
Airbnb is deepening its focus on international expansion. It is investing in under-penetrated or less mature international markets to unlock growth opportunities. The company’s growth in gross nights booked in these markets was more than that in the core markets. It intends to continue investing in less mature markets throughout 2024 and beyond for further growth.
ABNB’s growing investments to strengthen its core services are tailwinds. It has added more than 430 features and upgrades to its core service to make its platform more reliable and affordable for guests.
The launch of Guest Favorites, a collection of the most-loved homes on Airbnb based on ratings, reviews and reliability data, is driving the company’s momentum. It has witnessed more than 100 million nights booked at Guest Favorites listings since the launch.
The launch of a label feature, which ranks the top-listed properties with a badge, is a plus. The feature allows customers to choose from a wide range of properties.
It intends to expand its global network and partner with communities to help more hosts join its platform.
Airbnb introduced a category of extraordinary experiences called "Icons," hosted by celebrated personalities in music, film, TV and sports. This is helping common people understand the experience that ABNB offers.
Macro Headwinds & Competition Hurt Airbnb
Greater volatility in travel demands due to macroeconomic uncertainties, foreign exchange headwinds and the impacts of geopolitical conflicts have been major concerns for the company.
Shorter booking lead times globally and signs of sluggish demand from guests in the United States are headwinds.
Although Airbnb's brand is highly recognized around the world, rising competitive pressure from the two juggernauts of the online travel booking industry — Booking Holdings BKNG and Expedia EXPE — does not bode well for its market position. Listing and meta search websites like TripAdvisor TRIP and Trivago are strong rivals of ABNB.
Falling Earnings Estimates Do Not Bode Well for ABNB
Airbnb’s strong investments to bolster its key offerings in a bid to deliver enhanced experience to both host and guest communities are expected to drive its top-line growth in the long run.
For 2024, the Zacks Consensus Estimate for revenues is pegged at $11.03 billion, indicating a year-over-year increase of 11.2%.
Macroeconomic headwinds, and Intensifying competition which poses pricing pressure, do not bode well for ABNB’s margin expansion. These are making investors bearish about the stock, which is evident from the downward revision in earnings estimates.
The Zacks Consensus Estimate for third-quarter 2024 earnings is pegged at $2.27 per share, which has moved 8.1% south over the past 30 days. The estimate suggests a year-over-year fall of 5%.
The consensus estimate for 2024 stands at $4.33 per share, indicating a year-over-year decline of 40.2%. The estimate has moved 2% south over the past 30 days.
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Airbnb Offers Lofty Valuation
The ABNB stock is not so cheap, as the Value Style Score of D suggests a stretched valuation at this moment.
The company’s stock is trading at a premium with a forward 12-month Price/Earnings of 26.93X compared with the industry’s 22.62X.
Image Source: Zacks Investment Research
Final Take
Airbnb’s solid long-term prospects, owing to its strengthening host business, robust listings and expanding international footprint, present a compelling investment opportunity.
However, macroeconomic headwinds, travel market volatility, stretched valuation and stiff competition are dampening the company’s near-term prospects.
Existing investors may consider holding their positions, but new investors should exercise caution and wait for a more favorable entry point.
Airbnb currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
