On Wednesday, TD Cowen maintained its Buy rating on Airbnb Inc . (NASDAQ:ABNB) but reduced the price target from $170.00 to $125.00. The adjustment comes in response to a slight shortfall in the number of nights booked in the second quarter, which increased by 8.7% but was still below expectations. The firm noted that quarter-to-date lead times have decreased significantly, indicating a potential slowdown in bookings.
The firm's analysis predicts a more moderate underlying slowdown than what the lead times may suggest, estimating an increase of 6% in nights booked for the third quarter and a 7.5% rise for the fourth quarter. Despite these projections, the firm has revised its expectations for Airbnb's gross booking value (GBV) in 2025, reducing it by 4%, while also cutting the forecast for EBITDA by 9% and earnings per share (EPS) by 14%.
The revised price target of $125.00 is based on 26 times the firm's estimated free cash flow (FCF) for Airbnb in 2025. This new target reflects the firm's cautious stance on Airbnb's future earnings visibility and the expected impact of increased marketing and new initiatives, which are anticipated to boost revenue by an estimated 2% in 2025. Despite the reduced price target and expectations, TD Cowen continues to see Airbnb as a viable investment, as evidenced by the maintained Buy rating.
In other recent news, Airbnb Inc. has seen a series of revisions in its stock price targets by various firms. BMO Capital Markets has lowered its price target to $130, citing near-term challenges and market conditions. RBC Capital also reduced its price target to $120 due to concerns over increasing marketing expenses amid slowing demand. Meanwhile, Citi has reduced its price target for Airbnb to $135, despite maintaining a Buy recommendation. On the other hand, Benchmark continues to endorse Airbnb with a Buy rating and a maintained price target of $190.
Airbnb's Q2 performance exceeded estimates for Gross Bookings and EBITDA, however, the Q3 revenue is projected to fall short of expectations, ranging between $3.67 billion and $3.73 billion. Q2 profit decreased to $555 million or 86 cents per share, from $650 million or 98 cents per share last year. Despite these challenges, Airbnb reported an 11% increase in total revenue year-over-year, reaching $2.75 billion, and a similar rise in gross bookings value to $21.2 billion.
InvestingPro Insights
In light of TD Cowen's recent assessment of Airbnb Inc. (NASDAQ:ABNB), InvestingPro data and tips offer additional context for investors. Notably, Airbnb holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability. Additionally, an impressive gross profit margin of 82.59% in the last twelve months as of Q2 2024 highlights the company's ability to retain a significant portion of its revenue after accounting for the cost of goods sold.
While the company's net income is expected to drop this year, analysts have revised their earnings upwards for the upcoming period, suggesting a potential rebound. Furthermore, Airbnb's market capitalization stands at $72.05 billion, with a Price/Earnings (P/E) ratio of 15.07, which is relatively low when considering near-term earnings growth. This could indicate that the stock is undervalued compared to its growth potential.
For those interested in deeper analysis, InvestingPro offers additional tips on Airbnb, including insights into valuation multiples and profitability predictions. There are 13 more InvestingPro Tips available, which could further guide investment decisions. The InvestingPro Fair Value estimate of $136.1 also provides an independent perspective on Airbnb's valuation, compared to the analyst target of $150.
Investors can explore these insights and more by visiting InvestingPro for comprehensive financial metrics and professional stock analysis.
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