Based in San Francisco, California, Airbnb (ABNB) operates a platform for stays and experiences where more than 4 million hosts currently welcome guests arriving from over 220 countries all over the world.
Airbnb saw its shares go up approximately 22% over the past year, lagging the overall market by just a little bit, mainly due to the COVID-19 crisis.
Everybody can’t wait for the COVID-19 era to be over, but it seems it will take some time. Regarding the upcoming months, I think that ABNB’s share price will feel the blow of further lockdowns and other restrictions that the governments will impose to prevent the spread of new variants.
I wouldn’t buy shares until we are reassured that the vaccine is effective against all the variants that could arise soon. Thus, I am neutral on this stock. (See Analysts’ Top Stocks on TipRanks).
Q3 Earnings Results
For the three months ending September 30, 2021, Airbnb posted a record quarter thanks to traveling continuing to recover from the crisis due to the COVID-19 pandemic. GAAP earnings were $1.22 per share (versus the average consensus of $0.70), on total revenue of $2.24 billion.
The top line grew more than 67% year over year, exceeding projections by $180 million.
Gross booking value reached nearly $12 billion in the quarter in question, growing 48% year-over-year and by 23% from the same quarter in 2019.
Nights and Experiences bookings were strong in North America and EMEA while spurring in South America. The daily rates were generally higher than the previous two years.
Exercise Caution with Airbnb Stock
People’s strong desire for traveling following lockdowns and other restrictions may have influenced the third-quarter recovery. An unprecedented pent-up demand was released as limitations on flights were lifted. This cannot be neglected.
As well, we cannot exclude the impact on bookings from not habitual travelers or those who went on holiday to recover from the stress due to the pandemic. These increased significantly in the quarter. If so, part of the increase in gross booking value could have been triggered by strong emotional factors, with several bookings perhaps made impulsively.
About future demand, there are at least two matters of concern.
The strong recovery has caused record inflation in October. Private spending was quite resilient against the rise in the prices of goods and services. However, persistent inflation could lead thousands and thousands of households to trim the portion of disposable income to spend on trips and vacations.
The COVID-19 virus continues to mutate into new variants renewing investors’ concerns about recovery as soon as these appear. It happened with the Delta variant, and now the same story is repeating with the Omicron variant from South Africa.
The lack of a global strategic plan against COVID-19 coupled with a vaccine whose effectiveness against the variants is still being studied affects expectations on the recovery of each sector, especially for the travel and holiday sector.
Looking Ahead to the Final Quarter of 2021
For the final quarter of 2021, the company expects total revenue of $1.39 billion to $1.48 billion versus the consensus average of $1.47 billion. Nights and Experiences bookings are expected to keep on recovering, while the average daily rate should be approximately the same.
Wall Street’s Take
In the past three months, 27 Wall Street analysts have issued a 12-month price target for ABNB. The company has a Moderate Buy consensus rating based on 14 Buys, 12 Holds, and one Sell rating.
The average Airbnb price target is $198.92, implying 12% upside potential.
Summary
ABNB is not completely immune to headwinds from the COVID-19 crisis yet. The stock will rise as the situation improves globally, but there are still too many uncertainties weighing so far on the near-term prospects for the share price.
So, probably, the share price will again not perform as well as the overall market. As an indication, from recent ratings, it appears a tendency to reiterate more holds than buys.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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