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Friday’s Close
The stock market started with little change from Thursday’s closing levels and didn't react strongly to high inflation readings or increased Treasury yields. However, in the late afternoon, the major indices took a sharp turn lower, with no specific catalyst identified for the decline. This was somewhat less severe than Tuesday's post-CPI slide.
NVIDIA initially gained after Loop Capital initiated coverage with a Buy rating and a Street-high $1,200 price target, but later surrendered those gains. Despite the afternoon slide, market participants seemed unfazed by the morning's economic data, maintaining hope for favorable inflation trends and a strong macroeconomic environment, potentially leading to rate cuts by the Fed.
The S&P 500 found support near the 5,000 level earlier in the day, acting as a positive catalyst. However, only three of the 11 S&P 500 sectors closed higher, with materials, health care, and consumer staples showing gains, while the communication services sector experienced the largest decline.
The Week In Review
Retail sales: -0.80% m/m
Industrial production: -0.10% m/m
PPI: +0.30% m/m
PPI ex-food & energy: +0.50%
Housing starts decreased to 1,331K
Regarding economic data, January Housing Starts and Building Permits showed weakness, particularly in multi-family starts and permits. January PPI and Core PPI came in higher than expected, reflecting ongoing inflationary pressures. February's preliminary University of Michigan Consumer Sentiment index showed improvement, with consumers feeling more positive about the economy amidst easing inflation pressures and continued labor market strength.
Analyst Corner
Today, I will share my analysis for Airbnb ABNB 0.00%↑. I will dig in their latest earnings report and earnings call and share everything I find important with you.
I also share my analysis of the price action and what my prediction for the future of the company is.
Business Overview
Airbnb Inc. is a marketplace platform that connects hosts and guests online to book spaces and experiences worldwide. It primarily offers private rooms, primary homes, or vacation homes.
It was founded in 2007 as AirbBed & Breakfast, but it changed its name to Airbnb in 2010.
Q4 and Full-Year 2024 Financial Performance
The company posted its latest earnings report on the 13th of February. They closed 2023 with a robust financial performance, reporting record-high fourth-quarter metrics and achieving significant year-over-year growth in revenue.
Q4 revenue was $2.2 billion, up 17% year-over-year also it was their best Q4 ever. This number was driven by a record 99 million Nights and Experiences Booked, a modest increase in the Average Daily Rate (“ADR”), and an FX tailwind.
The company reported Net Loss for Q4 of $349 million, including non-recurring tax withholding expenses and lodging tax reserves of approximately $1 billion. The Adjusted Net Income excluding those expenses and applying a long-term effective tax rate of 21%, was $489 million compared to $319 million in Q4 2022. This was mainly driven by strong revenue growth, expense discipline, and interest income, resulting in a 22% Adjusted Net Income Margin.
Other Business Highlights for 2023:
Host community grew to 5 million globally.
Q4 supply growth increased by 18% year-over-year, resulting in more than 7.7 million active listings by the end of 2023.
Share repurchase of $2.25 billion during the year.
Nights and Experiences Booked grew by 12% compared to the previous year aided by a record Q4 with 99 million bookings.
The App accounted for 55% of gross Nights Booked which is 5% increase from the previous year.
Some of the main points from their recent earnings call made by the company Co-founder and CEO Brian Chesky:
Focus on improving the host experience led to significant growth in the host community and active listings.
Introduction of new features and upgrades (like Guest Favorite, Listing Tab, and transparent pricing) enchanced the affordability and reliability for guests.
Strategic expansion efforts yielded positive results in underpenetrated international markets such as Germany, Brazil, and Korea.
An acquisition of GamePlanner.AI to advance their AI capabilities.
Dave Stephenson (current CFO) was appointed as Airbnb's Chief Business Officer and Ellie Mertz was appointed as CFO, effective March 1, 2024.
Future Outlook:
New share repurchase authorization of up to $6 billion of Class A common stock
Continuing focus on making hosting mainstream to drive further growth in the host community.
Strategic expansion beyond the core business into underpenetrated international markets.
Emphasis on leveraging AI technology to develop innovative and personalized interfaces.
Continued investment in new features and upgrades to enhance the platform's functionality.
Long-term vision to offer more than just accommodation, aiming to become a comprehensive travel platform.
Here is my take so far:
Airbnb's push to make hosting more mainstream shows how important it is to keep hosts engaged to keep the platform growing. So it is very important to make Airbnb look attractive to people who might want to host. And with listings growing by double digits across different regions, Airbnb is managing to meet the rising demand for places to stay.
Improving their core service is all about making the guest experience better. They're constantly improving the user experience and are doing things like being more transparent about prices to build trust with users and keep them coming back.
Airbnb's move into the experiences vertical shows they're aiming for bigger growth. By focusing on markets where they're not as big yet and investing in AI, they're trying to find new ways to make money and become a one-stop-shop for travel.
Their success in breaking into new markets proves they can adapt to what people want in different places. Using the same successful strategies in new areas to grab more of the market and grow even more.
And with the aquisition of GamePlanner.AI is all about leveraging AI to make sure users find what they're looking for and get personalized recommendations, which will help them stay ahead of the competition.
Bull Case:
AirBnb network has achieved a critical mass, driven by its dominant share in the alternative accommodation market and the ongoing diversification into the experiential vertical.
The rapid growth in mobile app usage and Airbnb’s strong brand awareness contribute to approximately 90% of traffic coming directly or through unpaid searches to its platform.
What’s more the trend of remote work is driving sustained growth into the long and mid-term travel demand, and AirBnb is well-positioned to benefit from it.
PS: *As per their latest earnings call now more than two-thirds of the hosts offer a weekly or monthly discount.*
Bears Cases:
Rivals such as Booking and Expedia are intensifying their investment in alternative accommodation supply and brand awareness in the U.S., posing a competitive challenge.
Google's prioritization of paid advertisements and its metasearch platform over free organic search links may elevate marketing costs for Airbnb.
Regulatory hurdles related to societal impact, safety concerns, and economic implications could impede the growth of alternative accommodations.
Airbnb's operational model for individual host accommodations entails higher servicing costs compared to traditional hotels and other segments within the travel industry.1
Now moving to the price chart.
After finding a bottom at the end of 2022, the price shifted into a bullish intermediate trend. Since then there have been two waves of higher lows and higher highs playing out in almost the same timeframe and each wave was with a diminishing magnitude than the previous one.
In continuation of the pattern I expect the next wave to be of a lesser move and a high of around $170. A more optimistic outlook places a secondary target at $181.
The price currently maintains a favorable position, comfortably trading above both the 50-day moving average (blue-line) and the 200-day moving average (orange-line). Furthermore, the recent crossover of the 50MA above the 200MA reinforces the prevailing bullish sentiment.
Final thoughts:
As we look ahead for Airbnb, there's a sense of optimism on both its recent performance and its long-term potential. The way the stock has been trending, there's this steady momentum building up.
What’s more, when you step back and look at the bigger picture, you see Airbnb as this powerhouse in the travel world. Their unique approach, their way of connecting people with places to stay, is making Airbnb a synonym for traveling in younger generations. And with things looking up on the technical side and the fundamental strengths they've got going, it's hard not to feel bullish about where they're headed.
Disclaimer: Please note that the information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. The information provided should not be relied upon as a substitute for financial, legal, or professional advice. Before making any decision, it is important to consider all relevant information and consult with a professional who can provide personalized advice based on your specific circumstances. The author and publisher of this article cannot be held liable for any actions taken based on the information provided. This is not a recommendation to buy or sell any specific securities or financial instruments.
Taken from Dan Wasiolek, Senior Equity Analyst in Morning Star, 2 Nov 2023