On Tuesday, Bernstein SocGen Group adjusted its outlook on Airbnb Inc . (NASDAQ:ABNB) shares by reducing the price target to $155 from $174, while maintaining an Outperform rating on the company's stock.
The adjustment reflects the market's reaction to Airbnb's long-term growth prospects, with no mid-to-long-term guidance provided by the company.
Airbnb's share price has fluctuated in line with changing expectations for its long-term growth rate. Previously, when Airbnb reported revenue growth exceeding 20%, the consensus pegged the appropriate long-term growth rate at 17%. However, as short-term growth decelerated to 16% a year later, the consensus expectation for long-term growth was adjusted to 13%.
Following last month's guidance, which projected a disappointing 8-10% revenue growth, the consensus has further lowered its long-term outlook to below 10% for the first time, causing the stock price to drop accordingly.
The consensus also anticipates minimal margin expansion for Airbnb from 2023 to 2027. Despite these conservative estimates, Bernstein SocGen suggests that the current pessimistic view of Airbnb's growth trajectory might be overdone.
The firm points out that the tough comparisons faced in the third quarter are affecting all industry peers and that Airbnb's growth initiatives have not yet taken full effect.
Bernstein SocGen argues that Airbnb's revenue growth potential significantly exceeds the 10% threshold, especially if the company maintains stable margins.
The firm expresses continued support for Airbnb's long-term opportunities and suggests that the current market pessimism may offer a short-term entry point for investors, with lower estimates and a de-risked valuation.
InvestingPro Insights
As investors contemplate Bernstein SocGen's revised outlook on Airbnb Inc. (NASDAQ:ABNB), they may find additional context in the latest InvestingPro data. Airbnb's market capitalization stands robust at $74.34 billion, underpinning its substantial presence in the market. The company's price-to-earnings (P/E) ratio, which is currently 15.47, aligns with the firm's near-term earnings growth, indicating potential for those investing with an eye on earnings multiples. Moreover, Airbnb's impressive gross profit margin over the last twelve months as of Q2 2024, recorded at 82.59%, reaffirms the company's ability to retain a significant portion of its revenue after the cost of goods sold is accounted for.
InvestingPro Tips highlight Airbnb's strong balance sheet, as it holds more cash than debt, providing financial flexibility and resilience. Additionally, analysts predict the company will remain profitable this year, despite expectations of a net income drop. For investors seeking a deeper dive into Airbnb's financial health and potential investment strategies, InvestingPro offers a suite of additional tips, with 13 more listed on the platform.
While the near-term outlook may reflect a cautious stance, Airbnb's fundamentals, as indicated by InvestingPro data and tips, suggest that the company maintains a solid financial position. For those considering an investment in Airbnb, these insights could provide a valuable perspective beyond the immediate market sentiment.
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