Airbnb (NASDAQ:ABNB) is standing out amid a soft performance for the benchmark equities index, albeit for the wrong reasons. Down more than 4% as of this writing, ABNB stock is the subject of a recent short report issued by a popular financial social media influencer. Furthermore, the bearish argument surrounding the travel home rental platform aligns with the woes of last year.
Specifically, investment analyst Edwin Dorsey of The Bear Cave newsletter issued a report calling attention to risks underlying ABNB stock. The bulk of the report appears to stand behind a paywall. However, on the free side of the digital barrier, the article concentrates on negative consumer experiences sparking a flight to better (and sometimes cheaper) alternatives.
Acting as a ballast, however, one Twitter user responded with various counterarguments. Notably, he mentioned Amazon (NASDAQ:AMZN), which can also suffer from customer complaints and shady merchants. Nevertheless, Amazon continues to court recurring and new business. This implies that Airbnb may benefit from similar brand power.
However, one factor to keep in mind about Airbnb is the consequences of poor user experiences. With Amazon, usually the concentration of bad experiences focuses on lost funds or time wasted. In contrast, The Bear Cave lists Airbnb incidents involving extreme privacy violations, assaults and even fatalities.
The underlying theme is that these horrors could have been prevented through greater security protocols or regulation, thus making ABNB stock vulnerable to competition.
ABNB Stock Goes Back in Time
According to a Barron’s report in 2022, various travel-related enterprises — including Airbnb — expected a strong summer travel season last year. Unfortunately, though, gasoline prices spiked substantially, interest rates were elevated and recession fears grew. Therefore, the post-pandemic travel boom faced obstacles.
If that article were published today, few would arguably question the assessment. Practically the same headwinds that hurt ABNB stock then still apply now.
Due to the production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and non-member oil-producing nations, crude oil prices have jumped. High interest rates remain a problematic issue for the broader economy as well. Plus, with the recent banking sector fallout, recession risks are very much on the table. Therefore, ABNB stock isn’t enjoying an encouraging backdrop right now.
Further, if economic conditions weaken, rival travel rental providers may start reducing prices to attract customers. That might represent another obstacle for ABNB stock. Essentially, hotels and professional lodging services will offer standardized, regulated accommodations. The closer they reach price parity with mom-and-pop hosts, the less appealing Airbnb may become.
Why It Matters
While ABNB stock might not be the most appealing investment, that doesn’t necessarily mean it’s a short-selling candidate. According to Fintel, ABNB stock’s short interest is only 3.91% of its float. Its short interest ratio sits at 3.39 days to cover as well. Neither of these stats are remarkable.
On the date of publication, Josh Enomoto did not hold (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.
