Earnings

The Week Ahead: Airbnb's (ABNB) Earnings

Airbnb logo on a smartphone
Credit: ink drop - stock.adobe.com

There is a lot going on this week. Most people’s focus will, understandably enough, be on the inflation data. The Consumer Price Index (CPI) on Wednesday will detail the monthly and annual rates of inflation in retail prices, followed by the Producer Price Index (PPI) on Friday, giving the same data for input prices. Sandwiched between those two, on Thursday Retail Sales will give an indication of how the U.S. consumer is dealing with what inflation remains and, more importantly, how the measures being taken to control it are impacting their spending. By the time the market opens on Friday, we will all have a much clearer picture of the economy and will be a little further along in understanding whether or not we can continue with the Goldilocks scenario where rate hikes are controlling inflation without overly hurting economic activity.

All of that is of course vitally important, but investors should not lose sight of some important earnings reports that will also be released. As usual, Richard Saintvilus does a great job in his earnings preview for this week of giving a brief outline of what to look for, but there is one report that interests me more than others. Airbnb (ABNB) will give us their Q4 2023 results after the close on Tuesday and it will make interesting reading. I should say at this point that my interest is partly a product of my having bought some ABNB a few months ago, but their results and outlook will be fascinating even for those who aren’t long the stock.

After the pandemic provided a historic shock to the system of consumers, a clear trend emerged in spending patterns. People were more focused on “experiences” than “things.” Airline bookings strengthened rapidly, cruise ship holidays became popular again, and conventional hotel companies prospered. It always struck me as strange that, so soon after being scared of any contact that could result in disease transmission, people so readily flocked to places that represented massed humanity. It also surprised me that as stocks in those businesses flew, ABNB got a bit left behind. Logically, a company that offers accommodations that don’t involve standing in an elevator or walking halls with strangers should have done very well in that environment.

However, if disappointing results in what looks like a perfect storm for a company have an upside, it is that they damp down expectations for a while. Lower expectations result in opportunities. That is why I picked up some ABNB when I did, and I will be adding to my position today in advance if their Q4 earnings. Over the last few quarters Airbnb has consistently beaten expectations, and they have done so on two fronts.

They have improved bookings and sales, presumably as the last post-pandemic holdouts have succumbed to the “experiences” trend, with those still worried about contact seeing Airbnb’s as preferable to hotel rooms. Crucially, they have also made the transition from tech startup with big growth ambitions and the associated bulky cost structure to a company focused on making money, even if that means cutting back in some areas. The first improvement is out of their control and, while welcome, may prove to be fickle, but the second is a change of mindset that will last through market cycles for a long time to come.

If those two trends -- increased sales and lower costs -- continue when results are released on Tuesday, ABNB should react positively. The one thing that could change that is if they give cautious or negative guidance. However, given the resiliency shown by consumers so far when it comes to travel, that is probably unlikely and, should it come, could even be seen by traders as unnecessarily cautious and result in little if any negative reaction.

I am aware that it is easy to talk one’s book and to see things through rose tinted spectacles when you own a stock but, even allowing for that, the odds of earnings resulting in a pop in ABNB seem to be a lot higher than those of there being a big drop. Taking trades where the odds are in your favor, even while acknowledging that there is risk, is what traders and investors do. So, while I will be watching the inflation and consumer spending data and checking out what the various FOMC members have to say when they speak this week, my main focus will be on Airbnb and how they are navigating a somewhat difficult, but hopefully improving, environment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

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