- Q1 revenue and profit ahead of expectations
- But Q2 outlook falls short
- Growth to pick up ahead of busy summer
Global vacation booking platform Airbnb (ABNB:NASDAQ) saw its shares drop 8% in the pre-market despite revealing its most profitable quarter ever with net income more than doubling to $264 million, comfortably ahead of analysts’ estimates of $152 million.
Good news was tempered by a weak outlook as the San Francisco-based company projected second quarter revenue of between $268 billion and $274 billion, short of the $2.74 billion Wall Street analysts were calling for.
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) is expected to be flat at $819 million compared with forecasts of $917 million.
The shares are up around 24% over the last 12-months compared with a 34% gain in the Nasdaq Composite index.
HOW DID THE COMPANY PERFORM?
Revenue in the three months to the end of March increased 18% year-on-year to $2.1 billion, slightly ahead of forecasts and driven by solid growth in nights and experiences booked and a ‘modest’ increase in the average daily rate.
The earlier timing of Easter and an extra leap-year trading day in February contributed to the strong start to the year.
Free cash flow increased 19% to $1.9 billion taking the trailing twelve-month free cash flow to $4.2 billion equating to a margin on sales of 41%. Strong cash generation allowed the company to repurchase $750 million shares.
Airbnb has an authorisation to purchase a further $6 billion of shares equating to around 6% of its current market capitalisation.
Management said it expected growth to pick up in the middle of the year ahead of a busy summer of events including the Olympic Games in Paris, France.
EXPERT VIEW
Russ Mould, investment director at AJ Bell, commented: ‘Easter happening in March rather than April has effectively pulled forward seasonal demand into the first quarter, while foreign exchange issues also cast a dark cloud.
‘The Easter issue not only removes a traditional second quarter sales catalyst but also hits margins in the period because Airbnb won’t benefit from the traditional boost in prices that normally happens in early April. Throw in some one-off payment processing issues and higher marketing expenses and it’s clear that Airbnb’s head is spinning.
‘Strategically, the business looks focused on the right things. It is trying to make the concept of hosting more mainstream, improving the service for hosts and guests, and investing in less mature markets. It is also exploring the world of experiences where guests can stay in places like the last remaining Blockbuster shop, Ted Lasso’s favourite pub and Prince’s Purple Rain house.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (James Crux) own shares in AJ Bell.
