Airbnb (ABNB) Earnings Spotlight: Is the Travel Stock a Buy or Sell?

Airbnb, Inc. (ABNB) has been making headlines as new restrictions are being imposed. On September 5, New York City enforced what Airbnb terms a “de facto ban” on its short-term rental platform, triggering a sharp reduction in listings within the city, one of its chief markets. Furthermore, Canada is contemplating introducing new regulations for short-term rentals, which would affect Airbnb considerably.

Many analysts predict an imminent crash in real estate prices, suggesting a substantial shift looming in the real estate sector. Author of “Rich Dad Poor Dad,” Robert Kiyosaki, believes that Airbnb will be instrumental in precipitating this market crash.

Adding to this negative sentiment, David Bernstein, Chief Accounting Officer of ABNB, sold 3,402 shares of the firm on October 17, 2023. This disposal of stocks is not an isolated incident but part of a larger trend; over the previous year, Bernstein has sold 57,014 shares without any purchases. Over the past year, there have been 92 insider sales without a single case of insider buying.

Such a move, especially preceding the forthcoming earnings report, could indicate diminishing confidence in the company’s financial performance.

Additionally, analysts project ABNB’s revenue and EPS growth to be 16.8% and 17.4% year-over-year in the soon-to-be-reported quarter, ended September 2023.

Nonetheless, predictions for travel expenditure to continue dipping following the post-COVID spike could imply that revenue growth might slow down. Consequently, now may not be the opportune moment to invest in Airbnb stock as we scrutinize the critical aspects of ABNB’s performance.

Analyzing ABNB’s Financial Performance (2020 - 2023)

Summary of ABNB trailing-12-month net income Trend and Fluctuations

• On December 31, 2020, ABNB reported a significant Net Income loss of -$4.58 billion.
• There was a slight decrease in loss by September 30, 2021, to -$4.29 billion, but overall, the company continued to operate at a loss.
• By the end of 2021, the loss had been significantly reduced, with the net income reported on December 31, 2021, being -$352 million.
• An impressive turnaround was witnessed in 2022; as of March 31, ABNB reported a positive Net Income of $801 million.
• This positive trend continued with the company posting increasing profits throughout 2022: $1.25 billion in June, $1.63 billion in September, and topping the year with $1.89 billion in December.
• ABNB managed to keep its financial footing into 2023, with first-quarter earnings reaching $2.03 billion and second-quarter earnings rising further to $2.3 billion.

In general, ABNB exhibited a remarkable upward trend from operating at a heavy loss (-$4.58 billion) in 2020 to achieving an impressive profit ($2.3 billion) in June 2023. This signifies a significant change in fortunes for the company, highlighting a growth rate of around 150% when measuring from the first value to the last. The most recent data (for 2023) shows the company maintaining this positive trajectory.

Looking at the trailing-12-month revenue trend for ABNB, we observe a consistent and significant upward trajectory over the span from December 31, 2020, to June 30, 2023.

• On December 31, 2020, ABNB’s Revenue was $3.38 billion.
• By the end of the third quarter in 2021 (September 30, 2021), the Revenue had risen to $5.32 billion.
• As the year closed on December 31, 2021, ABNB reported a further increase to $5.99 billion.
• Entering into 2022, by the end of the first quarter (March 31, 2022), the Revenue had grown to $6.61 billion.
• In the second quarter of 2022 (June 30, 2022), ABNB’s Revenue witnessed another substantial growth to $7.38 billion.
• On September 30, 2022, the end of the third quarter, it reached an impressive $8.03 billion.
• The total Revenue of 2022 increased yet again, reaching $8.4 billion by December 31, 2022.
• On March 31, 2023, ABNB marked another increase to $8.71 billion.
• As of the last recorded date, on June 30, 2023, ABNB’s revenue rose to $9.09 billion.

In terms of growth rate, from the first recorded Revenue value of $3.38 billion on December 31, 2020, to the last logged value of $9.09 billion on June 30, 2023, ABNB’s Revenue has shown an impressive growth rate of approximately 169%. Despite some slight fluctuations in the progression, the overall trend demonstrates healthy and steady growth in Revenue for ABNB over this period. The emphasis on recent data also points to a promising financial perspective for ABNB moving forward.

The data presents the Current Ratio of ABNB over a span from December 2020 to June 2023. Following are the highlights of the trend and fluctuations:

• The company began with a Current Ratio of 1.735 on December 31, 2020, and ended at a ratio of 1.472 on June 30, 2023.
• The overall trend, as signified by the decrease in the Current Ratio from the initial to final values, points to a decrement of about 15%.
• ABNB witnessed noticeable fluctuations throughout the given period. There’s a consistent trend where the Current Ratio decreases each quarter’s end, followed by an increase in the last quarter before falling again.
• The largest decline was from March 31, 2021, to June 30, 2021 where the value decreased from 1.662 to 1.484.
• Contrastingly, the most substantial upsurge is seen between June 30, 2021, and September 30, 2021, where the Current Ratio jumped to 1.863 from 1.484.
• The Current Ratio had its peak at 1.948 on December 31, 2021, and the lowest at 1.472 on June 30, 2023.
• If we place higher emphasis on the most recent data, it can be observed that in the six months leading up to June 2023, the ratio fell from 1.863 (December 31, 2022) to 1.472 (June 30, 2023), indicating poor short-term liquidity or higher current liabilities compared to current assets.

In conclusion, the fluctuations suggest that ABNB’s Current Ratio has been relatively unstable throughout the observed period, with trends of short-term decreases followed by upturns.

The series of data for the Analyst Price Target of ABNB reflects gradual trend changes and some notable fluctuations over time.

• The Analyst Price Target remained relatively stable at around $194 from November 2021 to February 2022.
• In late February 2022, there was a short uptick to $200, but this quickly decreased again to $194 by April 2022.
• A significant decrease was observed in May 2022, hitting a low of $180.83 in early June 2022. This drop continued, reaching a bottom of $140 in August 2022 with some minor fluctuations.
• The price remained stagnant at $140 through October 2022 before it dropped further to $125 in November 2022, where it stayed till January 2023.
• Early 2023 showed signs of recovery, with increases through February and March, reaching a peak of $143.5 by early March 2023. However, this was followed by a quick decline in mid-May to $130.
• The last months of the data, from late July 2023 till October 2023, show another upward trend, reaching $145, the final value in the series.

The growth rate of the Analyst Price Target over the course of this data series, measured from the first value ($194) to the last value ($145), indicates a decrease of -25.26%.

ABNB’s Six-Month Rollercoaster: Price Fluctuations and Decelerating Trend Overview

Analyzing the data from May 2023 to October 2023, the share price of ABNB experienced fluctuations but showed an overall decelerating trend with periods of growth:

• On May 5, 2023, the price stood at $118.36.
• It then dipped to its lowest in this time frame on May 26, 2023, to $106.58.
• A steady climb was seen as it peaked at $149.80 on July 28, 2023.
• This was followed by a sharp drop to $125.96 on August 25, 2023.
• The share price recovered and reached $145.57 by September 15, 2023.
• This surge was short-lived as it fell down again to close at $116.92 on October 30, 2023.

As such, despite the peaks and troughs of the share value, the overall accelerating growth rate from late May to late July suffered a subsequent deceleration from late July to the end of October. Here is a chart of ABNB’s price over the past 180 days.

Assessing ABNB’s Quality, Momentum, and Growth: A Review from May to October 2023

ABNB has an overall C rating, translating to a Neutral in our POWR Ratings system. It is ranked #15 out of the 21 stocks in the Travel - Hotels/Resorts category.

The three most noteworthy dimensions for ABNB are Quality, Momentum, and Growth. Here is a brief review of these dimensions from May to October 2023:

Quality

• In May 2023, the quality rating was 100.
• This score remained consistent throughout the observed period until October 2023, indicating solid and steady quality.

Momentum

• In May 2023, the momentum rating was at 82.
• The rating hit a high of 88 in July 2023 and experienced a gradual decline thereafter, settling at 73 in October 2023. This indicates a strong but slowly decreasing momentum trend.

Growth

• The growth dimension started at 74 in May 2023.
• Despite fluctuating, it overall decreased over the observed period, reaching 32 in October 2023, showing a clear downward trend.

In summary, while ABNB demonstrated strong Quality ratings consistently, it showed decreasing Growth and Momentum ratings over this period. While its Momentum score is still high, declining growth could be a point of concern for future performance.

How does Airbnb, Inc. (ABNB) Stack Up Against its Peers?

Other stocks in the Travel - Hotels/Resorts sector that may be worth considering are Genting Berhad (GEBHY), Bluegreen Vacations Holding Corp. (BVH), and Genting Singapore Limited (GIGNY) -- they have better POWR Ratings.

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ABNB shares were trading at $116.43 per share on Tuesday morning, down $0.52 (-0.44%). Year-to-date, ABNB has gained 36.18%, versus a 9.94% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

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