Airbnb (ABNB) shares plunged over 6% in early trading Thursday after the vacation rental firm issued a subdued forecast for the second quarter, raising investor concerns about slowing growth. Despite reporting strong quarterly profit, the company projected current-quarter revenue below Wall Street estimates due to the Easter holiday falling in Q1 rather than Q2, coupled with unfavorable currency exchange rates. The company also anticipated the growth rate of room nights booked to remain relatively flat on a sequential basis, though the average daily rate is expected to see a modest year-over-year increase.
The disappointing forecast prompted Jefferies analysts to note, "Airbnb failed to deliver a beat/raise on nights, which we believe was necessary to ease concerns about slowing growth and the risk of downside to consensus estimates for accelerating growth in the second half of 2024 and in 2025." According to BTIG analysts, Airbnb's Q2 guidance implied nights booked of around 125 million to 127 million, below the consensus estimate of 129.2 million. "While Airbnb topped the Q1 guide, it was shy of more aggressive buyside expectations in the quarter and the Q2 outlook," BTIG's Jake Fuller wrote in a client note.
Market Overview:
-Airbnb shares plummet over 6% after a weak Q2 revenue forecast triggers a wave of investor anxieties:
Missed Expectations:
-Q2 revenue projections fall short of lofty Wall Street estimates.
Flat Growth in Bookings:
-The company anticipates a stagnant number of room nights booked compared to Q1.
Currency Headwinds:
-Unfavorable foreign exchange impacts cited as a factor in the Q2 outlook.
Easter Timing Shift:
-The Easter holiday falling in Q1 this year affects year-over-year comparisons.
Moderating US Demand:
-Concerns about slowing US leisure travel further dampen investor sentiment.
Key Points:
-The company projects Q2 revenue below analyst expectations, citing factors like Easter timing and currency fluctuations.
-Flat growth in room nights booked is anticipated for Q2, with a modest year-over-year increase in average daily rates.
-Moderating US leisure travel demand adds to investor unease about Airbnb's growth trajectory.
Looking Ahead:
-The stock decline reflects disappointment with the lack of a sequential increase in nights booked.
-Analysts remain divided, with some calling the sell-off an overreaction and others highlighting potential downside risks.
-Airbnb's valuation remains higher than competitor Booking Holdings, despite the near-term growth concerns.
However, Morningstar analyst Dan Wasiolek described the slump in shares as an overreaction to weaker second-quarter guidance. "The outlook for 2024 is relatively unchanged, in our view," Wasiolek stated. He emphasized that the second-quarter challenges were primarily due to external factors like the timing of the Easter holiday and exchange rate fluctuations rather than a fundamental decline in Airbnb's business. Shares of Airbnb, which have risen 16% this year, were at $148.21 by 1356 GMT on Thursday, trading at about 33.31 times forward profit estimates compared to Booking Holdings Inc.'s (BKNG) 19.40 multiple.
Moderating leisure travel demand in the U.S. has also been a concern for investors, with growth in nights booked slowing. Still, the overall market remains strong, and analysts believe Airbnb is well-positioned to capitalize on future opportunities. The company is banking on a steady recovery in international travel and an uptick in urban bookings to sustain its growth trajectory. While near-term challenges persist, particularly with rising competition from rivals like Booking Holdings (BKNG) and Expedia (EXPE), Airbnb's global reach and brand recognition continue to be key differentiators in the crowded vacation rental market.
