Airbnb Earnings: Shares Drop 10% on Unwarranted Near-Term Profit and Demand Concerns

Narrow-moat Airbnb ABNB shares fell more than 10% after hours as 14% second-quarter sales growth guidance (at the midpoint) came below FactSet consensus expectations of 15% (our estimate was 14%), and the company mentioned near-term elevated marketing investment. We see neither of these as a reason to lower our forecast or $127 per share fair value estimate, leaving shares slightly undervalued.

First-quarter sales were up 20% versus 16%-21% guidance (our estimate was 17%), driven by solid 19% growth in volumes (19%), representing an astounding 149% of 2019′s level, and steady rates (drop of 2%), which were 138% of prepandemic marks. For 2023, we continue to forecast Airbnb’s volume and rates at 142% and 134% of 2019′s level, respectively, equating to sales growth of 13% for the year versus 14% consensus forecasts. In our view, our volume prognosis is supported by Airbnb’s room night bookings which for the second half of this year are 25% higher than this time last year. We think our forecast for weakening rates is prudent, as the mix of cross-border (63% of 2019 revenue) and urban (around 12% of room night bookings in 2019) travel increases, given that these locations and types of lodging (more apartment than full home) can pressure pricing. To this effect, cross-border nights grew 36%, well in excess of the 19% lift for the consolidated company. Further, Airbnb has launched tools to improve affordability on its platform, namely total price display, pricing tools for hosts, and a tab for shared rooms, which we also think will be a moderating driver for the overall rate.

Finally, EBITDA margin was 14% versus 15% last year, and management commented that it expects to spend on marketing earlier in this year versus last year to take advantage of summer demand, which we think is justified. While this will curb near-term profits, we see this as a timing issue, and don’t think it will change Airbnb’s ability to print 2023 margins near 2022′s 34.6% (our 2023 estimate is 34.7%).