Airbnb’s Q2 Earning Results Show Signs of Demand Moderating From High Levels
We expect to trim Airbnb stock fair value estimate from $116.
Narrow-moat Airbnb (ABNB) stock traveled lower as signs of near-term peak demand emerged. We plan to reduce our $116 valuation on Airbnb stock by a mid-single-digit percentage, leaving shares appropriately valued.
Second-quarter nights totaled 103.7 million, or 124% of 2019′s level, slightly below the company’s guidance to be near last quarter’s 126% of 2019′s level and missing our 107.4 million night forecast (which equated to 128% of prepandemic marks). More concerning was leadership’s third-quarter guidance for nights to be up just 25% from the prior year, equating to about 100 million nights or 116% of 2019′s level, comfortably below our 118 million forecast (138% of prepandemic marks). We now think our 2023 night forecast to reach 164% of 2019 levels is too aggressive and plan to lower it toward 140%.
That said, night rates are proving more resilient than previously expected, as pricing power is offsetting the negative mix shift toward urban units as that market is now recovering faster than the nonurban locations that led the rebound from the depths of the pandemic in 2020. In this vein, the average rate was $164 in the second quarter, ahead the year-ago print of $161, which was also our forecast. And management expects rates to improve again from a year ago in the third quarter, which was ahead of our forecast for slight contraction. Still, third-quarter revenue guidance of $2.8 billion-$2.9 billion is below our $3.05 billion target and we think 2022 and 2023 sales growth is likely to be closer to 17% and 36%, respectively, than the 19% and 42% we had modeled.
While demand growth might be moderating off high absolute levels, profitability continues to improve and track toward our forecast. Airbnb’s second-quarter adjusted EBITDA margins reached 34% versus 15% last quarter and the company still expects some expansion in 2022 from the 26.6% level printed in 2021, harmonizing with our 27.9% estimate for the year.
Dan Wasiolek does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.