The announcement of Airbnb, Inc. (ABNB) to be included in the S&P 500 on September 18, before the market opening, has triggered significant investor interest. Moreover, the stock has witnessed a steady run this year, bolstered by a robust demand within the travel sector.
However, recent regulation enforcement targeting Airbnb and short-term rentals within New York City could potentially impact the company’s immediate growth. New regulations require hosts to register with the city and meet certain obligations.
Last month, ABNB reported approximately 15,000 listings across the city. In contrast, the New York Times reported that as of August 28, only around 3,250 registration applications had been received, with a mere 257 been approved.
Opposing these regulations, ABNB initiated legal action, which was subsequently dismissed last month. These regulatory changes may severely affect the company’s revenue, potentially leading to losses of millions of dollars, given that New York is one of Airbnb’s largest markets.
In light of these uncertainties, today may not present the most favorable opportunity for investing in the stock. Let’s look at some of its key financial metrics.
An Analytical Study of Key Metrics from 2020 to 2023
The trend in the trailing-12-month net income of ABNB, starting from December 31, 2020, to June 30, 2023, sees a remarkable turnaround. Here are some key points:
- On December 31, 2020, ABNB recorded a substantial loss of -$4.58 billion.
- By the end of the third quarter in 2021, the net loss had slightly decreased to -$4.29 billion.
- The company then noted an immense improvement by year-end 2021, minimizing losses to just -$352.03 million.
- Positive growth emerged in the first quarter of 2022, with the company reporting a net income rise to $801.39 million, engendering a distinct shift from a loss in the previous years and quarters.
- This upswing continued through 2022, culminating with a net income of $1.89 billion by the end of the year.
- The rise in net income carried over to 2023, with the recorded numbers showcasing a steady increase: $2.03 billion at the end of the first quarter and $2.3 billion by the end of the second quarter.
The annual growth rate, measured by comparing the last value ($2.3 billion on June 30, 2023) against the first value (-$4.58 billion on December 31, 2020), reveals a significant positive growth trend for ABNB. This mirrors ABNB’s successful transition from a period of considerable loss into a trajectory of steady income gain.
Based on the provided data series, the gross margin for ABNB has experienced a gradual positive growth over time with minor fluctuations from the end of 2020 through to mid-2023. Here is an outline of significant points:
- December 31, 2020: The gross margin was at 74.1%
- September 30, 2021: It grew to 79.9%, an overall increase from December 2020
- December 31, 2021: By the end of 2021, it rose slightly to 80.7%
- March 31, 2022: An uptick was observed by the end of the first quarter of 2022 to 80.9%
- June 30, 2022: There was a further increment accounting for 81.6%
- September 30, 2022: A small rise up to 82.0%
- December 31, 2022: This continued to be on the rise, finishing the year at 82.2%
- March 31, 2023: A slight drop to 82.0% in the first quarter of 2023
- June 30, 2023: The gross margin stabilized at 82.3% midway through the year 2023
This reveals a trend of steady growth, interspersed with slight fluctuations. The gross margin for ABNB has seen an estimated increase of 8.2% from December 2020 to June 2023. Recent numbers, particularly the last value in the series, show a stabilizing trend towards mild growth.
The Current Ratio of ABNB showed both an overall fluctuating trend and particular periods of stability between 2020 and mid-2023. Multiple peaks and troughs could be observed in their quarterly reported figures, reflecting volatile market conditions and ABNB’s rapidly changing liquidity situation. Below are some of the key details:
- The Current Ratio started from an initial point of 1.65 in September 2020. It experienced a short-term increase and peaked at 1.74 at the end of 2020.
- However, it later followed a downward trend, hitting the minimum value of 1.47 by the end of June 2023.
- The company had several fluctuations where the Current Ratio rose to a considerably higher figure, like in September 2021 (1.86) and December 2022 (1.86), before slight decreases set in.
- Particular stability in the ratio was noted, such as the sustained level near 1.86 between September 2022 to December 2022.
- The most recent data (June 2023) indicated a current ratio 1.47.
Calculating the growth rate between the first value (September 2020, 1.65) and the last value (June 2023, 1.47) it suggests a decrease of about 10.91%. This indicates that ABNB’s Current Ratio has generally been on a declining trend over this period.
The Analyst Price Target (APT) of ABNB exhibited several trends and fluctuations from November 2021 to September 2023.
- From 2021 November 12 up until February 25, 2022, the APT remained relatively stable at around $194, with only slight variations, such as a small increase to $194.125 on December 3, 2021.
- Afterwards, in late February 2022, it rose to $200 but slightly dwindled to $198 in late March 2022.
- In May 2022, there was a noticeable drop in the APT, sliding to $189.6 by mid-May and continuing to reach $180.83 by early June.
- By August 2022, the APT experienced a dramatic drop to $140, maintaining this value for roughly two months.
- From November 2022 until January 2023, the APT steadily declined to $125.
- However, on February 3, 2023, there was a slight increase, leading to a more significant jump to $143.5 by March, which persisted until mid-May.
- There was a brief dip in mid-May 2023, with the APT dropping to $130 and hovering around that region till the end of July.
- Finally, starting from July 2023, there was a recovery period as the APT gradually increased, reaching the peak at $145 by late August, which is where the series ended.
Overall, comparing the first value ($194) to the last value ($145), ABNB’s Analyst Price Target has experienced a decline of approximately 25%. This represents a negative growth rate over the period under consideration despite some periods of recovery and stability.
Analyzing ABNB’s Fluctuating Share Price and Growth Trends: March-September 2023
Here’s the trend and growth rate of the share price of ABNB from the given data:
- On March 17, 2023, the share price stood at $116.45.
- By March 24, 2023, there was an increase, and the share price surged to $120.48. The trend was upward at this point.
- The price dipped slightly to $119.94 on March 31, 2023, and continued to decrease to reach $116.17 by April 6, 2023, indicating a short-term decelerating trend.
- The lowest price observed in this data set was on May 26, 2023, reaching $106.57. Thus, the overall trend from mid-March to late May was downward.
- However, the share price began to grow significantly midway through June, reaching its peak at $149.80 by July 28, 2023. This suggests a clear and rapidly accelerating trend over these months.
- The share price then fell substantially to $125.96 on August 25, 2023, representing a clear and decelerating trend in August.
- Finally, bouncing back from this drop, the share price rose again to $142.34 by September 7, 2023, indicating a resurgence in the upward trend.
The data reveals a fluctuating growth rate for the ABNB share price. Throughout the period from March 17, 2023, to September 7, 2023, the ABNB shares experienced several highs and lows, with the most noticeable rapid acceleration occurring between June and July and a significant deceleration in August. The final data point indicates a possible return to an upward trajectory. Here is a chart of ABNB’s price over the past 180 days.
Examining ABNB’s Quality, Momentum, and Growth: Insights from POWR Ratings
ABNB has an overall C rating, translating to a Neutral in our POWR Ratings system. It is ranked #17 out of the 22 stocks in the Travel - Hotels/Resorts category.
Through an examination of the POWR Ratings for ABNB, it is observed that the top three noteworthy dimensions are Quality, Momentum, and Growth.
Quality: The Quality of ABNB consistently scored a perfect 100 throughout the monitored period. This dimension has retained a remarkable high rating, indicating the superior quality associated with ABNB.
Momentum: The Momentum dimension shows a clear upward trend over time. Starting off at 72 in March 2023, the momentum rating climbed to 88 by July 2023. Although it saw a slight dip to 81 in August 2023, it continued to maintain a relatively strong rating, ending at 79 as of September 7, 2023.
Growth: The Growth dimension appears to show a declining trend over time. It started at a high of 87 in March 2023 but has consistently decreased over time, registering 68 in July 2023, followed by a steep fall to 42 in August 2023 and further down to 29 by September 7, 2023.
It’s interesting to note that while Quality consistently held maximum value and Momentum showed a progressive increase, the Growth rating declined over the course of time for ABNB as per the POWR Ratings.
How does Airbnb, Inc. (ABNB) Stack Up Against its Peers?
Other stocks in the Travel - Hotels/Resorts sector that may be worth considering are Genting Berhad (GEBHY), Bluegreen Vacations Holding Corp. (BVH), and Genting Singapore Limited (GIGNY) -- they have better POWR Ratings.
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ABNB shares were trading at $145.85 per share on Friday morning, up $2.58 (+1.80%). Year-to-date, ABNB has gained 70.58%, versus a 17.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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