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Airbnb (ABNB) Earnings Analysis: Buy, Sell, or Hold Strategy?

Travel and hospitality giant Airbnb (ABNB) will publish its first-quarter earnings on May 8. The company is expected to report earnings and revenue growth over the prior-year quarter. Therefore, is the stock a buy, sell, or hold ahead of its earnings? Read on to learn my view...

Airbnb, Inc. (ABNB) is set to reveal its first-quarter results on May 8. Wall Street is optimistic, expecting the vacation rental company to report higher revenue and earnings. With ABNB’s earnings on the horizon, I have discussed why waiting for an opportune entry point in the stock could be wise.

For the first quarter, ABNB’s EPS and revenue are projected to rise 27.7% and 13.4% year-over-year to $0.23 and $2.06 billion, respectively. The company has a robust earnings track record, surpassing the consensus estimate in three of the past four quarters. By the end of 2023, active listings exceeded 7.7 million, rising 18% year-over-year in the fourth quarter.

ABNB also recorded a record free cash flow of $3.8 billion in fiscal 2023. The company expects its first-quarter revenue to be between $2.03 billion and $2.07 billion. Needham analyst Bernie McTernan downgraded the stock from Buy to Hold. He expects the company’s first-quarter revenue and EPS to come in at $2.05 billion and $0.73, respectively.

ABNB’s stock has gained 30.2% over the past six months and 34.4% over the past year, closing the last trading session at $159.71.

Here’s what you might want to consider ahead of its upcoming earnings release:

Mixed Financials

ABNB’s revenue for the fourth quarter ended December 31, 2023, increased 16.6% year-over-year to $2.22 billion. Its gross booking value rose 15% year-over-year to $15.50 billion. The company’s adjusted EBITDA increased 45.8% year-over-year to $738 million.

On the other hand, its loss from operations came in at $496 million, compared to an income from operations of $235 million in the year-ago quarter. Its net cash provided by operating activities declined 86.4% year-over-year to $63 million. In addition, its net loss stood at $349 million, compared to a net income of $319 million in the year-ago quarter.

Also, its net loss per share attributable to Class A and Class B common stockholders came in at $0.55, compared to a net income per share attributable to Class A and Class B common stockholders of $0.48 in the year-ago quarter.

For the fiscal year ended December 31, 2023, ABNB’s revenue rose 18.1% year-over-year to $9.92 billion. Its adjusted EBITDA grew 25.8% year-over-year to $3.65 billion. The company’s net income increased 153.1% year-over-year to $4.79 billion. Also, its net income per share attributable to Class A and Class B common stockholders stood at $7.24, representing an increase of 159.5% year-over-year.

In addition, its net cash provided by operating activities rose 13.2% year-over-year to $3.88 billion.

However, its income from operations declined 15.8% year-over-year to $1.52 billion.

Mixed Analyst Estimates

Analysts expect ABNB’s EPS for fiscal 2024 to decline 40.3% year-over-year to $4.32. Its revenue for fiscal 2024 is expected to increase 12% year-over-year to $11.11 billion. Its EPS and revenue for fiscal 2025 are expected to increase 15.2% and 12% year-over-year to $4.98 and $12.43 billion, respectively.

Stretched Valuation

In terms of forward non-GAAP PEG, ABNB’s 2.53x is 64.4% higher than the 1.54x industry average. Its 36.17x forward non-GAAP P/E is 136% higher than the 15.33x industry average. Likewise, its 10.72x forward Price/Book is 355.4% higher than the 2.35x industry average.

High Profitability

ABNB’s 82.83% trailing-12-month gross profit margin is 128.2% higher than the 36.30% industry average. Furthermore, the stock’s 15.31% trailing-12-month EBIT margin is 100.1% higher than the 7.65% industry average. Also, its 28.56% trailing-12-month levered FCF margin is 404.3% higher than the 5.66% industry average.

POWR Ratings Reflect Uncertainty

ABNB has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ABNB has a C grade for Sentiment, consistent with its mixed analyst estimates.

ABNB’s stock is trading below its 50-day moving average of $160.94 but above its 200-day moving average of $142.03, justifying its C grade for Momentum.

ABNB is ranked #15 out of 19 stocks in the Travel – Hotels/Resorts industry. Click here to access ABNB’s Growth, Value, Stability, and Quality.

Bottom Line

ABNB ended the year strongly capitalizing on the strong pent-up demand for travel. The company has said guest demand remains strong, especially for first-time users. The vacation rental company said it started the first quarter strongly, with more than six million guests celebrating the new year in an Airbnb.

Moreover, in its shareholder letter, ABNB said it was at an “inflection point,” and 2024 will be a transformational year. The company’s future growth will be driven by focusing on three major areas: growing the supply of its high-quality stays and experiences worldwide, expanding into underpenetrated nations, and expanding beyond its core business by launching new businesses.

While pent-up travel demand has boosted the company’s top and bottom lines, there are signs that the pace at which travel demand grew has peaked. The uncertain macroeconomic conditions and increasing competition with its peers cloud ABNB’s prospects.

Given its mixed financials, analyst estimates, and momentum, it could be wise to wait for a better entry point in the stock.

How Does Airbnb, Inc. (ABNB) Stack Up Against Its Peers?

ABNB has an overall POWR Rating of C, equating to a Neutral rating. You may check out these A and B-rated stocks within the Travel – Hotels/Resorts industry: Genting Berhad (GEBHY), Atour Lifestyle Holdings Limited (ATAT), and Travel + Leisure Co. (TNL). For exploring more Buy-rated Travel – Hotels/Resorts stocks, click here.

What To Do Next?

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ABNB shares rose $2.04 (+1.28%) in premarket trading Monday. Year-to-date, ABNB has gained 17.31%, versus a 7.90% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.


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