On Wednesday, Citi revised its price expectations for Airbnb Inc . (NASDAQ:ABNB) shares, reducing the price target to $135 from the previous $167, while still recommending the stock as a Buy.
The adjustment follows Airbnb's announcement of its second-quarter performance, which, despite outperforming consensus estimates for Gross Bookings and EBITDA, prompted a more cautious outlook for the third quarter.
Airbnb's recent report indicated that a shorter booking lead time, which began in July, along with a decline in Gross Bookings for stays booked more than two months in advance and a slowdown in demand within the U.S., has affected the company's forecast accuracy. As a result, Airbnb's guidance for the upcoming quarter was lower than anticipated.
The company is in the process of increasing investments in product development and sales and marketing (S&M), which is expected to put further strain on profitability. Among the new initiatives are a cohosting marketplace, the reintroduction of Airbnb Experiences, and enhanced services for guests and hosts.
Despite these near-term challenges to revenue growth and profitability, Citi's commentary highlights Airbnb's continued leadership in alternative accommodations and sustained strength in short-term demand.
The analyst projects a potential rebound in net earnings before taxes (N&EB) in the fourth quarter of 2024 and into 2025 as Airbnb's new product offerings take hold.
Following the release of the quarterly results and the subsequent guidance, Airbnb's shares saw a significant drop of approximately 17% in after-hours trading.
Citi's maintained Buy rating reflects a continued positive outlook on the company's long-term prospects, albeit with a lowered price target to reflect the current uncertainties.
InvestingPro Insights
As investors digest the revised price target from Citi for Airbnb Inc. (NASDAQ:ABNB), real-time data and insights from InvestingPro provide a deeper understanding of the company's financial health and market position. Notably, Airbnb holds more cash than debt on its balance sheet, signaling a strong liquidity position that could support its investment in new initiatives despite near-term profitability pressures. Additionally, analysts have shown confidence in the company's earnings potential, with four analysts recently revising their earnings expectations upwards for the upcoming period.
InvestingPro data underscores Airbnb's impressive gross profit margins, with a reported 82.86% for the last twelve months as of Q1 2024. This, coupled with an adjusted P/E ratio of 16.75, suggests that Airbnb is trading at a low price relative to its near-term earnings growth. The company's market capitalization stands at $82.83 billion, reflecting its significant presence in the market despite recent share price volatility.
For readers interested in a more comprehensive analysis, InvestingPro offers additional tips on Airbnb, which could provide further insights into the company's valuation multiples and profitability forecasts. These insights can be found at https://www.investing.com/pro/ABNB, where more than a dozen InvestingPro Tips are available to guide investment decisions.
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