What Happened?
Shares of online accommodations platform Airbnb (NASDAQ:ABNB) fell 8.2% in the afternoon session after the company reported third-quarter earnings and provided revenue and EBITDA margin guidance for the next quarter that fell short of Wall Street's estimates. Revenue and EBITDA in the quarter both beat, and encouragingly, bookings (referred to as 'Nights & Experiences Booked' by the company) growth accelerated in Q3 and through Q4 thus far.
While observing encouraging demand trends, the company plans to continue investing in product development and also ramp up marketing efforts to capture more market share.
However, these initiatives may come at the cost of short-term margin compression, as the Q4 implied EBITDA margin derived from the full-year EBITDA guide suggests year on year margin compression.
Overall, the results revealed better top line trends but the continuation of a 'show me story' with regard to margins and the returns on big investment spend.
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What The Market Is Telling Us
Airbnb’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock dropped 16.6% on the news that the company reported weak second-quarter earnings results. Its bookings missed and its revenue guidance for next quarter missed Wall Street's estimates. The company said that "...we are seeing shorter booking lead times globally and some signs of slowing demand from U.S. guests."
On the other hand, revenue beat slightly, and adjusted EBITDA beat by a more convincing amount. Overall, this was a mixed but weaker quarter for Airbnb.
Airbnb is down 0% since the beginning of the year, and at $134.41 per share, it is trading 20.1% below its 52-week high of $168.18 from March 2024. Investors who bought $1,000 worth of Airbnb’s shares at the IPO in December 2020 would now be looking at an investment worth $928.88.
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