- First quarter beat but Q2 guidance seen as soft
- Good, but not good enough
- Threat from regulation and competition increasing
Was the markets’ response to Airbnb (ABNB:NASDAQ) overnight an overreaction? That’s the question that will be on many investor’s minds ahead of Wall Street’s reopening later today, but it will be an ugly session for the $80 billion homes and rooms-rental platform.
Pre-market data shows the stock opening nearly 14% down at $109.78.
‘Good but not good enough,’ is how one commentator described first quarter earnings that easily beat expectations but were hurt by soft second quarter guidance and a somewhat cautious tone on the summer ahead.
EARNINGS AND GUIDANCE
Airbnb swung to a net profit of $117 million from a net loss of $19 million a year ago, its first-ever profitable January to March quarter. EPS came in at $0.18 versus $0.09 expected on $1.82 billion revenue against a $1.79 billion forecast.
Second quarter guidance was $2.35 billion to $2.45 billion, arming optimists with ammo that this was broadly in line with $2.42 billion consensus, according to Investing.com data. If you buy that line, the overnight share price reaction might well be overcooked.
In the meantime, talk of AI initiatives (artificial intelligence) cut little ice with the markets looking at bookings and prices, and both are heading in the wrong direction, according to AJ Bell investment director Russ Mould.
‘This is unsurprising, people are likely to opt for the most affordable accommodation on the platform if they can,’ he said.
IS POST-PANDEMIC TRAVEL RALLY OVER?
A bigger worry is this could be the first sign that the impressively resilient spending on travel in the wake of the pandemic is coming under greater pressure just when competition and regulation may be getting stiffer.
‘The company is now facing fierce competition from rivals like Booking.com and Expedia’s Vrbo so its future looks less certain,’ said Third Bridge analyst Nicholas Cauley. There is also talk of stricter rules. According to AJ Bell’s Mould, there are plans in the UK, for example, to make homeowners listing entire properties on short let platforms to have to seek planning permission first.
Airbnb said to remain competitive, it was equipping hosts with new tools to normalise pricing and starting its marketing campaigns earlier in the year to attract cost-conscious travellers ahead of the peak summer season.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (Tom Sieber) own shares in AJ Bell.
