Airbnb Stock Takes a Hit Amidst Slowing US Demand and Consumer Downturn
Airbnb's shares took a nosedive in premarket trading in New York following the company's less than satisfactory second-quarter earnings report. This report not only fell short of Wall Street's predictions but also contained a warning about a decrease in demand from US vacationers. This worrying news comes at a time when the US is facing increasing recession risks, with a consumer downturn hitting the working poor and middle class hard due to high inflation and interest rates.
Airbnb has indicated that it is witnessing shorter booking lead times globally and signs of decreasing demand from US guests. The second quarter saw a 8.7% increase in bookings, reaching 125.1 million, but this was not up to the anticipated 126.33 million. Airbnb is expecting a "sequential moderation" of booking growth in the third quarter.
In times of a consumer downturn, households often cut vacation spending as a first step to conserve cash. This is particularly concerning as low/mid-income consumers are experiencing significant financial stress. Airbnb's earnings and gloomy outlook suggest that the consumer slowdown is likely to worsen as the year progresses.
A glance at the second-quarter earnings (courtesy of Bloomberg) reveals:
- Revenue: $2.75 billion, +11% y/y, estimate $2.74 billion
- Gross booking value: $21.2 billion, +11% y/y, estimate $21.23 billion
- Adjusted Ebitda: $894 million, +9.2% y/y, estimate $862.3 million
- Adjusted Ebitda margin: 33%, estimate 31.4%
- EPS: 86c vs. 98c y/y
- Nights and experiences booked: 125.1 million, +8.7% y/y, estimate 126.33 million
- Gross booking value per nights and experiences booked: $169.53, +2.1% y/y, estimate $167.96
- Free cash flow: $1.04 billion, +16% y/y, estimate $788 million
Third-quarter estimates suggest a "sequential moderation" in booking growth, hinting at consumers pulling back:
- Sees revenue: $3.67 billion to $3.73 billion, estimate $3.84 billion (Bloomberg Consensus)
- Sees ADR up modestly Y/Y
- Sees Adj Ebitda similar to 3Q23 on a nominal basis
- Sees Adj Ebitda margin down relative to 3Q23
Airbnb's shares fell by 15% in premarket trading on early Wednesday. If the intraday declines surpass 16%, shares would record the largest-ever intraday decline.
Analysts at RBC Capital Markets led by Brad Erickson commented that Airbnb's outlook "will likely only further stoke the soft consumer thesis." Other Wall Street analysts also weighed in on the earnings report (courtesy of Bloomberg).
Meanwhile, last week, travel website Booking Holdings reported worse-than-expected guidance, noting a "mild moderation" across the European travel industry and consumers opting for lower-star hotels and shorter stays, primarily in the US.
Airbnb's earnings report further confirms that the consumer downturn theme is gaining momentum. It won't be long before Goldman advises clients to start shorting stocks with exposure to upper-income folks, having already advised clients to short companies with low/mid-consumer exposure.
Bottom Line
Airbnb's recent performance and the overall consumer downturn in the US paints a concerning picture for the travel and hospitality industry. As the financial stress on low and mid-income consumers continues to rise, companies like Airbnb are likely to face further challenges. What are your thoughts on this situation? Do you think Airbnb and similar companies can weather this storm? Share this article with your friends and let's discuss. Also, don't forget to sign up for the Daily Briefing, delivered to your inbox every day at 6pm.
Airbnb Stock Takes a Hit Amidst Slowing US Demand and Consumer Downturn
Airbnb's shares took a nosedive in premarket trading in New York following the company's less than satisfactory second-quarter earnings report. This report not only fell short of Wall Street's predictions but also contained a warning about a decrease in demand from US vacationers. This worrying news comes at a time when the US is facing increasing recession risks, with a consumer downturn hitting the working poor and middle class hard due to high inflation and interest rates.
Airbnb has indicated that it is witnessing shorter booking lead times globally and signs of decreasing demand from US guests. The second quarter saw a 8.7% increase in bookings, reaching 125.1 million, but this was not up to the anticipated 126.33 million. Airbnb is expecting a "sequential moderation" of booking growth in the third quarter.
In times of a consumer downturn, households often cut vacation spending as a first step to conserve cash. This is particularly concerning as low/mid-income consumers are experiencing significant financial stress. Airbnb's earnings and gloomy outlook suggest that the consumer slowdown is likely to worsen as the year progresses.
A glance at the second-quarter earnings (courtesy of Bloomberg) reveals:
- Revenue: $2.75 billion, +11% y/y, estimate $2.74 billion
- Gross booking value: $21.2 billion, +11% y/y, estimate $21.23 billion
- Adjusted Ebitda: $894 million, +9.2% y/y, estimate $862.3 million
- Adjusted Ebitda margin: 33%, estimate 31.4%
- EPS: 86c vs. 98c y/y
- Nights and experiences booked: 125.1 million, +8.7% y/y, estimate 126.33 million
- Gross booking value per nights and experiences booked: $169.53, +2.1% y/y, estimate $167.96
- Free cash flow: $1.04 billion, +16% y/y, estimate $788 million
Third-quarter estimates suggest a "sequential moderation" in booking growth, hinting at consumers pulling back:
- Sees revenue: $3.67 billion to $3.73 billion, estimate $3.84 billion (Bloomberg Consensus)
- Sees ADR up modestly Y/Y
- Sees Adj Ebitda similar to 3Q23 on a nominal basis
- Sees Adj Ebitda margin down relative to 3Q23
Airbnb's shares fell by 15% in premarket trading on early Wednesday. If the intraday declines surpass 16%, shares would record the largest-ever intraday decline.
Analysts at RBC Capital Markets led by Brad Erickson commented that Airbnb's outlook "will likely only further stoke the soft consumer thesis." Other Wall Street analysts also weighed in on the earnings report (courtesy of Bloomberg).
Meanwhile, last week, travel website Booking Holdings reported worse-than-expected guidance, noting a "mild moderation" across the European travel industry and consumers opting for lower-star hotels and shorter stays, primarily in the US.
Airbnb's earnings report further confirms that the consumer downturn theme is gaining momentum. It won't be long before Goldman advises clients to start shorting stocks with exposure to upper-income folks, having already advised clients to short companies with low/mid-consumer exposure.
Bottom Line
Airbnb's recent performance and the overall consumer downturn in the US paints a concerning picture for the travel and hospitality industry. As the financial stress on low and mid-income consumers continues to rise, companies like Airbnb are likely to face further challenges. What are your thoughts on this situation? Do you think Airbnb and similar companies can weather this storm? Share this article with your friends and let's discuss. Also, don't forget to sign up for the Daily Briefing, delivered to your inbox every day at 6pm.
