Airbnb Inc. (NASDAQ: ABNB), a platform that connects hosts and guests to book travel and stay services worldwide, has decided to vacate its Chinese operations in the light of stiff competition and strict lockdowns, the Wall Street Journal reported.
Shares sank 2.9% on the news during the extended trading session. Amid a broader tech sell-off and geopolitical uncertainties, ABNB stock has lost 34.4% year to date.
Why is Airbnb Leaving China?
China is undoubtedly one of the largest markets for technology companies to expand their foothold. However, stringent operating rules, increasing loyalty towards mainland brands, and strict lockdowns to counter the resurgence of COVID-19 cases, have all amplified the operating difficulties of foreign companies in China.
All these factors are affecting Airbnb’s travel business in China, leaving the company no choice but to vacate the country. Airbnb faces fierce competition from local Chinese travel companies. People familiar with the matter said Airbnb’s China business accounts for only 1% of its overall revenue. Moreover, the lockdowns are dragging down the little business that the company has.
Nonetheless, sources did note that Airbnb’s outbound travel business is flourishing well in the nation, with travelers booking through the platform for their international vacations. The company will continue to operate one office fully dedicated to outbound travel bookings, employing hundreds of people.
The company is expected to officially announce the exit early this week, and all of Airbnb’s listings, homes, and experiences in China will be closed by this summer.
Airbnb Stock Prediction
Wall Street analysts have a cautiously optimistic view of ABNB stock with a Moderate Buy consensus rating based on 13 Buys and 15 Holds. The average Airbnb price target of $190.23 implies 67.9% upside potential to current levels.
Stock Investors
TipRanks’ Stock Investors tool shows that investor sentiment is currently Neutral on Airbnb, with 0.6% of portfolios tracked by TipRanks increasing their exposure to ABNB stock over the past 30 days.
Parting Thoughts
Although Airbnb is leaving China’s domestic homestay business, its outbound travel business will continue to perform well. Furthermore, since its Chinese business represents only a small part of the company’s overall revenue, the decision will not have much impact on the company. Meanwhile, in other parts of the world, Airbnb is set to benefit from the post-pandemic rebound in travel, as was witnessed in its robust Q1FY22 results.
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