Mad Hedge Technology Alerts!
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 $135 after another 8% selloff.
Even more prevalent, the stock has also been punished as non-AI stocks and AI stocks have bifurcated into two separate paths.
Airbnb has been talking up getting into other businesses like experiences, and I don’t believe that will move the needle in terms of revenue growth.
Property management is another sub-sector they are talking about to expand, but again, I don’t see that as a solution, and that type of work is incredibly labor intensive, which tech companies should stay away from.
At a time when tech companies are looking to automate to look to go on auto-pilot, Airbnb is going the other way and will need more human labor.
Labor costs have been trending higher, and property management will never be an industry where a tech company can just substitute with an algorithm.
Many of times, when tech and real estate intertwine, the Frankenstein company loses its way and doesn’t succeed.
Airbnb will just need to settle for a lower premium than most other tech stocks. I would stay away from this stock for now and head to higher ground to ride the bandwagon of AI.
Mad Hedge Technology Letter
November 6, 2024
Fiat Lux
Featured Trade:
(TECH STOCKS POISED TO MOVE UP)
($COMPQ), (PLTR), (MSFT), (AMZN), (GOOGL), (INTC)
Now that the U.S. election has come and gone with nothing more than a whimper, we are full speed ahead with the last upmove in tech stocks ($COMPQ) for the year 2024.
The beginning of the rally is here, and readers shouldn’t miss it.
A lot of money was waiting on the sidelines, and now we will start seeing institutional money pouring in.
The equity market ripping higher up on the news of a new administration coming to town is a highly bullish signal for the rest of the year for the Nasdaq index.
Chip stocks did quite remarkable today, with the likes of Micron up around 6% at the time of this writing.
I believe that fund managers will hop on and try to achieve the extra alpha now that the biggest risk of an incomplete election is off the table.
The move down in gold by around 3% suggests that fear over the election being inconclusive is off the table.
I don’t envision the new administration starting a witch hunt against tech stocks. Tech stocks still represent a massive motor in the United States economy, which the administration will respect.
Much of the same trends that were occurring before the election continued along the same path, such as a stronger dollar, higher yields, and a weak Japanese yen.
Tech stocks can move higher with all these trends.
In general, a Republican administration should be good for the tech sector, and the corporate taxes will benefit Silicon Valley the most.
First, there's artificial intelligence. The market should expect significant AI initiatives within the U.S. that would be a benefit for Microsoft (MSFT), Amazon (AMZN), Google (GOOGL), and other tech players. Department of Defense AI initiatives would also benefit the likes of Palantir Technologies (PLTR).
Republicans could make major revisions to President Biden's Inflation Reduction Act, which could negatively impact the act's beneficiaries, such as Intel (INTC).
Tesla and its CEO, Elon Musk, will be the biggest beneficiary of a Trump administration. Trump is likely to stop or reduce the electric vehicle rebates and tax incentives. That would be an overall negative for the EV sector but a big positive for Tesla. As will Trump's proposed selective import tariffs.
Tesla has the scale and scope that are unmatched in the EV industry, and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players (BYD, NIO, etc.) from flooding the U.S. market over the coming years.
One of the only few things the Democrats did well was igniting equity prices and, specifically, tech stocks, which is a positive omen moving forward.
Ultimately, a crushing loss by the Democrats revealed another crippling black eye to liberal mainstream media, which should accelerate cord-cutting and the transition to citizen journalism and other independent journalist sources.
Left-wing mainstream media sources wielding radical progressive viewpoints luckily won’t do much collateral damage to tech stocks, and in the backdrop of a strong U.S. economy, I am highly optimistic about tech stocks in the short term.
I believe that the Trump administration will attempt to supercharge tech stocks by cutting red tape and allowing them to flourish.
Reducing taxes will be the bow tie on top to really juice up shareholder returns.
I am bullish on tech stocks going into the end of the year because much of these synergies are still not discounted yet in the price of tech stocks.
