Even though Airbnb (NASDAQ:ABNB) provided a cautious outlook for the current quarter, this shouldn’t scare prospective investors away. In actuality, Airbnb’s Q1-2023 results were outstanding, and the company’s forward guidance wasn’t anything to worry about. So, I am bullish on ABNB stock despite — or because of — the sudden unjustified share-price drop.
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Headquartered in San Francisco, Airbnb operates an app that allows people (called hosts) to rent out their homes to travelers. Thus, Airbnb’s success depends on the state of the travel industry and on the health of the economy generally.
Airbnb has an excellent post-COVID-19 track record of earnings beats, and 2023’s first quarter was no exception. Yet, sometimes, traders are known to react to a company’s forward guidance more than to the company’s prior results. Still, in the case of Airbnb, the company’s current-quarter expectations are reasonable and realistic, and investors can choose clear-minded allocation over panic selling.
Airbnb Has Its First Profitable Q1 Ever
Just this milestone ought to convince any skeptics that Airbnb is on the right track, financially speaking. This year’s first quarter marked Airbnb’s first profitable Q1 in the company’s history. Airbnb swung to profitability as the company reported net income of $117 million, compared to a net loss of $19 million in the year-earlier quarter. On a per-share basis, Airbnb earned $0.18, beating the consensus forecast of $0.10.
Airbnb also achieved a first-quarter record adjusted EBITDA of $262 million, up 14% year-over-year. Yet another Q1 record for Airbnb was the company’s $1.8 billion in revenue, up 20% year-over-year and slightly ahead of Wall Street’s consensus prediction of $1.79 billion.
Furthermore, Airbnb’s first-quarter 2023 free cash flow of $1.6 billion was its “highest ever.” As you can see, Airbnb achieved a number of milestones and exceeded the experts’ expectations on the top and bottom lines. What more could anyone possibly ask for?
Airbnb’s Guidance Wasn’t All That Bad
Evidently, financial traders wanted more than what Airbnb had delivered – or at least, there was something in Airbnb’s quarterly press release that didn’t please them. ABNB stock is currently down more than 10% following the quarterly announcement. So, what did investors object to?
The culprit, it seems, was Airbnb’s outlook for the second quarter of 2023. Don’t get the wrong idea; Airbnb’s management doesn’t anticipate a slow travel season, even if some skeptics might glean that message from Airbnb’s press release. The fact is, Airbnb expects “another strong summer travel season” and is guiding for a revenue range of $2.35 billion to $2.45 billion in Q2, which would be up 12% to 16% year-over-year. That would be a perfectly respectable outcome if it happens.
Here’s what probably caused anxiety for ABNB stock traders. The company admitted, “Nights and Experiences Booked will have unfavorable year-over-year comparisons in Q2 2023” due to overlap in “pent-up 2022 demand following the COVID Omicron variant.” Moreover, Airbnb expects current-quarter year-over-year growth in that segment “to be lower than our revenue growth during the quarter.”
If that’s Airbnb’s biggest problem, it’s not the worst problem to have. The company is basically saying that Airbnb’s bookings won’t be quite as robust this quarter as it was in Q2 2022. That’s because 2022’s second quarter was unusually busy for Airbnb’s hosts due to pent-up post-COVID-19 demand. Due to what I would call the “comparison effect,” Airbnb can’t be expected to repeat the exceptional results obtained in the year-earlier quarter.
This doesn’t necessarily mean Airbnb’s current-quarter bookings will be weak. Frankly, I wouldn’t be surprised if there’s a relief rally when Airbnb releases its next earnings report in three months. If the company can produce results that aren’t as bad as expected, ABNB stock might soar.
Is ABNB Stock a Buy, According to Analysts?
Turning to Wall Street, ABNB stock comes in as a Moderate Buy based on 16 Buys, 15 Holds, and two Sell ratings. The average Airbnb stock price target is $134.86, implying 18.6% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell ABNB stock, the most accurate analyst covering ABNB stock (on a one-year timeframe) is Ronald Josey of Citigroup (NYSE:C), with an average return of 8.66% per rating and a 67% success rate. See below.
Conclusion: Should You Consider Airbnb Stock?
Airbnb’s actual results were super solid and beat the Street’s expectations. In addition, the company’s forward guidance isn’t horrendous by any means. Airbnb’s management prepared the market for current-quarter bookings that probably won’t be exceptional but could still be pretty good.
If the current sentiment surrounding Airbnb is low now, this could provide a setup for a relief rally at some point in the future. Therefore, investors can consider a long position in ABNB stock in case a rebound occurs in the coming months.
