Why Airbnb Stock Was Down This Morning

What happened

Shares of Airbnb (NASDAQ: ABNB) were sliding today as the travel stock reacted to yesterday's interest rate hike from the Federal Reserve and hawkish commentary on ongoing rate hikes as the central bank seeks to rein in inflation.

Though there was no company-specific news out on Airbnb, the interest rate movement was enough to push the stock lower today.

As of 10:55 a.m. ET, the stock was down 6.3%, while the Nasdaq was off just over 1%.

So what

As an expensive travel stock, Airbnb has greater sensitivity to interest rates than most of the market. Travel, especially the vacation/personal travel that Airbnb specializes in, is one of the more discretionary categories of consumer spending. When the economy is strong, consumers tend to spend more on vacations.

The Federal Reserve is raising interest rates to combat inflation, but Fed chair Jerome Powell said at the press conference that a higher unemployment rate and even a recession are potential consequences of rising rates. Still, the central bank believes the best course of action is to tame inflation, even if it comes at the expense of wounding the economy.

Travel stocks were down broadly today as peers like Expedia and Booking Holdings reacted to the news, but Airbnb was down more sharply, likely because the stock is more expensive than its peers and because vacation travel is generally more discretionary than business travel.

Now what

Following its decision to lay off a quarter of its staff early in the pandemic and focus on profitability, Airbnb has delivered on that promise. In its second quarter, it posted an adjusted EBITDA margin of 34% on revenue growth of 58% to $2.1 billion.

Those are stellar numbers, showing that so far the company has been unbothered by fears of a recession. The economy looks strong for now as unemployment remains low and consumers are happy to spend on travel, but Airbnb investors should keep an eye on the macro environment, as rising rates could pose a risk for the home-sharing stock.

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Jeremy Bowman has positions in Airbnb, Inc. The Motley Fool has positions in and recommends Airbnb, Inc. and Booking Holdings. The Motley Fool has a disclosure policy.

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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