Airbnb Is In The Dog House
Revenue increased 10% from $3.4 billion a year earlier, and that is where the problem lies for Airbnb (ABNB).
Growth rates of 10% are a problem in technology.
The mantra of scaling out and monetizing is all but expected for growing tech companies.
Something in the ballpark of 30% and higher is something that shareholders would prefer to see.
Just look at the top tech company right now, Nvidia and the breathtaking 126% revenue growth year over year is an example of what I am talking about.
A measly 10% won’t cut it, and it explains the hard sell-off in shares in the travel platform this morning.
It’s true that the company isn’t a cash burner, and the company noted a $2.8 billion tax benefit during the third quarter of 2023, but to really fetch that premium on the stock market, investors will need to see demonstrably higher growth rates and better profitability.
Average daily rates increased 1% from a year ago to $164 in the third quarter, signaling a cooling down of revenue opportunity.
If per-night revenue isn’t growing fast, then Airbnb will need to make that up on the volume.
This is starting to look and feel like a company that won’t be able to scale their product.
Remember that acquiring a listing on Airbnb is an intensive process for the property owner, and the 12% in commission Airbnb requires is probably at the upper limit of what they can ask.
Airbnb said adjusted EBITDA for the third quarter was $2 billion, up 7% year over year.
Gross booking value, used by Airbnb to track host earnings, service fees, cleaning fees, and taxes, totaled $20.1 billion in the third quarter. The company reported 123 million nights and experiences booked, up 8% from a year ago.
Airbnb said it saw hosting growth across all regions and market types during the third quarter. The company said in its shareholder letter that it has more than 8 million active listings and has worked to improve listing quality. Airbnb has removed more than 300,000 listings since last year.
In 2021, the stock was priced at over $200, and fast forward to today, it is languishing at $135 after another 8% selloff.
Even more prevalent, the stock has also been punished as non-AI stocks and AI stocks have bifurcated into two separate paths.
Airbnb has been talking up getting into other businesses like experiences, and I don’t believe that will move the needle in terms of revenue growth.
Property management is another sub-sector they are talking about to expand, but again, I don’t see that as a solution, and that type of work is incredibly labor intensive, which tech companies should stay away from.
At a time when tech companies are looking to automate to look to go on auto-pilot, Airbnb is going the other way and will need more human labor.
Labor costs have been trending higher, and property management will never be an industry where a tech company can just substitute with an algorithm.
Many of times, when tech and real estate intertwine, the Frankenstein company loses its way and doesn’t succeed.
Airbnb will just need to settle for a lower premium than most other tech stocks. I would stay away from this stock for now and head to higher ground to ride the bandwagon of AI.
