Airbnb dealt downgrade to Hold on slowing room nights growth

With a less attractive risk/reward driven by increased competition, soft domestic demand, and fewer extended visits — all of which will weigh on the company’s profits — Argus downgraded Airbnb (NASDAQ:ABNB) to Hold from Buy, driving shares lower in premarket trading.

In the company’s most recent earnings report, Airbnb (ABNB) predicted nights booked in Q3 to be lower than in Q2, a significant development which weighed on shares and will continue to adversely impact the stock’s valuation into Q3 results in November.

Argus is looking for Airbnb (ABNB) revenue to increase 13% in FY24 to $11.2B, fueled by growth in international travel and higher room rates. For FY25, the firm’s revenue estimate is $12.7B as bookings are expected to continue to increase amid reduced cancellations and higher occupancy.

Argus’ earnings estimates, however, are lowered to $4.20 from $4.64 per share in FY24 and to $4.70 from $5.40 per share in FY25.

“We expect a deceleration in bookings growth, higher marketing spending, and unfavorable foreign exchange translations to negatively impact earnings,” said Argus analyst John Staszak to support his downgrade.

But Staszak would reverse this downgrade if room nights growth exceeded his expectations, or extended visits were to slow less than anticipated. Additionally, over the long term, Staszak expects ABNB to post high-teens revenue and earnings growth as the company offers new services and as travel increases in its developed markets.

Analysts are split on Airbnb (ABNB) with Seeking Alpha authors viewing the stock as a Buy while Wall Street analysts give Airbnb (ABNB) a Hold rating. Seeking Alpha’s Quant rating also has the stock as a Hold.