Airbnb (ABNB) is a technology company that disrupted the vacation industry by letting people to offer hosting to customers from around the world. Over the years, the company has helped millions of people launch and scale their hosting businesses.
This growth was seen in the company’s revenue and profitability growth in this period. Total revenue jumped from over $3.37 billion in 2020 as the world locked up because of the Covid-19 pandemic, to over $10.5 billion in the trailing twelve months.
Most importantly, Airbnb has moved from making billions of dollars in losses to being a highly profitable company. Its net profit in the trailing twelve months jumped to over $4.8 billion, up from a loss of over $4.8 billion in 2020.
Airbnb’s growth coincided with the so-called revenge traveling, a situation where people who accumulated savings during the pandemic embarked on traveling.Â
Recently, however, there are signs that Airbnb’s growth is slowing as travel demand falls and competition rises. As a result, its stock remains in a bear market after falling by over 30% from its highest point this year.
Airbnb’s stock was trading at $119 on Monday while the HypeIndex metric jumped to 102%.
Positive hype
Airbnb published mixed second-quarter results, which showed that its growth was indeed slowing. Its revenue rose by 11% to $2.75 billion while its net income fell to $555 million. On the positive side, its net cash provided by operating activities rose to $1.1 billion.Â
The company still maintains a healthy market share in the reservation and online booking market. Other companies, however, like Booking.com, Expedia, TripAdvisor, and Sonder are gaining market share.
Airbnb’s stock crash could be a good one to buy-the-dip since the company is still growing. Analysts expect that its annual revenue will rise by almost 20% in 2023 to over $11 billion.Â
The management is continuing to invest in research and development (R&D) as it prepares to launch a co-hosting marketplace in October and then relaunch the experiences business. It also hopes to grow its business beyond the short-term rental market.
Brian Chesky, the CEO has also committed to invest in other under-penetrated markets like in the Southeast Asia region.Â
The company will also benefit when interest rates start falling, triggering more travel demand.
Negative hype
Airbnb has also generated some negative hype in the past few weeks, which explains why its stock has dropped.
It has received some negative headlines, including a rating downgrade by Goldman Sachs. The bank has a sell rating on the stock.Â
The company is seeing more competition from other companies. While it has a strong market share, other platforms like Booking and Expedia have made it easier for people to book their vacations in their platforms.
Airbnb has a limited room to increase its prices as it seeks to improve its relationship with hosts.Â
It is also facing regulatory challenges, especially in California, a key market. A recently passed law to ensure total price display and cancellation grace period. These rules are important since California accounts for about 10% of the total business.Â
Airbnb is also seeing shorter stays, meaning that customers are no longer spending as they used to in the revenge travel era.
Summary of Airbnb stock
Airbnb is a good company that, like Google, has become a verb over the years. It has a good market share in the vacation rental industry and its revenue growth is continuing, albeit at a slower pace.Â
Airbnb is also working to become a more profitable company by reducing costs. These actions will likely be welcomed by most investors.Â
The company also has a strong balance sheet, with over $11 billion in cash and short-term investments and just $2 billion in long-term debt.
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