Airbnb (ABNB) Stock Sinks 10% on Weak Q4 Outlook

  • Shares of Airbnb (ABNB) slipped more than 10% on Wednesday following third-quarter earnings.
  • The company beat expectations but provided disappointing guidance for Q4.
  • Currency and business-related headwinds may impact ABNB stock.
ABNB stock - Airbnb (ABNB) Stock Sinks 10% on Weak Q4 Outlook

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In a classic case of good but not good enough, Airbnb (NASDAQ:ABNB) successfully overcame the first hurdle, beating out Wall Street’s expectations for the third quarter. Unfortunately, management disclosed disappointing guidance for Q4, sending investors rushing for the exits. On Wednesday morning, ABNB stock dropped as much as 10% heading into the afternoon session.

Initially, the Q3 disclosure started off auspiciously enough. The online marketplace, which focuses on short-term homestays and experiences, posted revenue of $2.9 billion. This tally represented a 29% lift from the year-ago period. In addition, it beat the Street’s estimate of $2.84 billion. On the bottom line, profits came out to $1.79 a share, beating the consensus target of $1.47.

Impressively, Barron’s reported that gross booking value pinged $15.6 billion. This was up 29% against the year-ago level, meeting management’s prior expectations. As well, “Nights and experiences booked were 99.7 million, up 25% and in line with the second-quarter level.”

Further, Barron’s remarked:

“Adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, was $1.5 billion, up 32%—or 44% adjusted for currency—and a record. Adjusted Ebitda margin was 51%, up from 49% a year ago; Airbnb had forecast that the figure would be flat to down from one year ago.”

Left there, the circumstances would appear very positive for ABNB stock. “Our Q3 results demonstrate that Airbnb continues to drive growth and profitability at scale,” Airbnb said in a statement. “Regardless of continued macro uncertainties, we believe we’re well-positioned for the road ahead.”

ABNB Stock May Face Significant Pressures Ahead

For the current quarter, Airbnb “sees revenue of $1.8 billion to $1.88 billion, up between 17% and 23%; adjusted for currency, the company sees growth of between 23% and 29%. At the midpoint of the range, the forecast is a smidgen below the consensus of $1.85 billion,” per Barron’s. This disclosure represented the first point of concern for ABNB stock.

The other matter centered on revenue as a share of gross bookings, what Airbnb refers to as the “take rate.” Management expects this metric to decrease from Q3. While the leadership team noted that this dynamic was “consistent with historical seasonality,” it couldn’t save ABNB stock from volatility.

As Yahoo! Finance pointed out, “Airbnb faces a number of macroeconomic headwinds, from the strength of the U.S. dollar and inflation, to a hawkish Fed and the consumer slowdown. Foreign-exchange headwinds knocked 7% off of Airbnb revenue for the quarter, and erased 15% of net income.”

Chief executives of travel-related enterprises expressed optimism about their services, citing post-pandemic demand surges. While such surges did boost other companies’ earnings reports, the problem for the strong dollar is that it might yield a one-way street. In other words, American tourists may find traveling abroad attractive. However, the opposite may not be true for international visitors to the U.S.

Therefore, investors may still need to maintain vigilance on Airbnb. Since the start of the year, ABNB stock has fallen more than 42%.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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