Huge Bookings Beat Should Boost Confidence in Airbnb

There’s no denying that the Covid-19 pandemic put negative financial pressure on San Francisco-based home-sharing network Airbnb (NASDAQ:ABNB). As a result, folks who choose to invest in ABNB stock have to tolerate a certain amount of risk and volatility.

A close-up shot of the Airbnb (ABNB) app on a smartphone screen.

Source: AngieYeoh / Shutterstock.com

The emergence of the delta variant strain of Covid-19 has only added to the uncertainty. In light of this issue, Airbnb’s investors must decide whether to stay the course or jump ship.

Perhaps the company’s just-released second-quarter fiscal results might add some clarity to the situation. At the same time, Airbnb’s near-term outlook — which specifically cites the delta variant — could add to people’s concerns.

At the end of the day, traders will have to weigh the company’s past results against its future prospects. Hopefully, we’ll end up with a positive conclusion as Airbnb seeks to find its footing during these challenging times.

A Closer Look at ABNB Stock

Even though Airbnb was formed in 2007, the company’s shares weren’t available for public trading on the Nasdaq Exchange until December 2020.

On its first day, ABNB stock opened at $146 and rocketed up to $165, but closed at $144.71. The bullish momentum continued for a while afterward. By Feb. 11, buyers managed to push the Airbnb share price up to $219.94.

I’ve said it before and I’ll say it again: buying stocks after a massive run-up can lead to financial disaster. After ABNB stock topped out in February, a multi-month decline ensued.

By Aug. 12, the share price was barely above $151. That same day also marked an important event for Airbnb and its stakeholders.

The initial reaction from the trading community was decidedly negative, but I’ll present the facts to you and let you decide how to respond.

Airbnb’s Low Earnings Expectations

First and foremost, let’s review what the analysts on Wall Street were predicting for Airbnb’s second quarter of 2021.

According to FactSet, analysts expected Airbnb to report an adjusted earnings loss of 36 cents per share on revenues of $1.26 billion.

In terms of the actual results, Airbnb definitely beat Wall Street’s projections. The company posted an adjusted earnings loss of 11 cents per share on revenues of $1.3 billion. A lesser loss is still a loss. Nonetheless, the results indicate that Airbnb is exceeding analysts’ expectations.

And it only gets better from there. Airbnb recorded $83.1 million in quarterly bookings for “nights and experiences,” representing a 197% year-over-year (YOY) increase and a 29% quarter-over-quarter improvement.

Some folks might view low earnings expectations as problematic, but in reality, they can provide a setup for an earnings beat.

Anticipating the Impact

Given those numbers, you might assume that the trading community should be happy to accumulate shares of ABNB stock.

Yet that’s not necessarily the case. Apparently, some investors reacted negatively to the company’s warning regarding the impact of Covid-19 and the delta variant on the travel sector:

“In the near term, we anticipate that the impact of Covid-19 and the introduction and spread of new variants of the virus, including the delta variant, will continue to affect overall travel behavior, including how often and when guests book and cancel.”

That’s a reasonable warning, and prospective Airbnb investors should brace for what may be a bumpy ride.

As the company put it, “year-over-year comparisons for nights and experiences booked and (gross booking value) will continue to be more volatile and nonlinear.”

This is duly noted, though I would suggest that there’s no new information being presented here. In all likelihood, the future impact of Covid-19 variants has already been priced into ABNB stock shares.

The Bottom Line on ABNB Stock

The path forward won’t be smooth for Airbnb. As anticipated by the company, Covid-19 is likely to have a continued impact on its bookings and, by extension, its shares. However, investors probably already knew this.

At the same time, the recently-released fiscal data looks quite positive. Hence, risk-tolerant traders should consider a moderate position in ABNB stock at its currently low price.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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