Airbnb stock sits and waits for earnings: buy or sell?

Airbnb (ABNB) stock price has rebounded in the past few months, erasing most of the losses it made after publishing its earnings in August. It bounced back to $137 on Monday, its highest level since July 29. It has rallied by over 23% from its lowest point this year. 

Airbnb stock is struggling as growth slows

Airbnb is one of the most disruptive companies in the hospitality industry. Established in 2008, it has become the market leader in the vacation rental industry, which is expected to be worth over $129 billion by 2029.

The company, however, has come under pressure in the past few years as its growth has slowed, partly because of the competition it is facing. Most of this competition is coming from firms like Booking, Expedia, Vrbo, and HomeAway.

Airbnb has also found it difficult to expand its business in other industries. For example, its initial attempts to move to the experiences industry faced major headwinds. It is now working to relaunch the solution.

The most recent results showed that Airbnb’s revenues rose by 11% to $2.75 billion in the second quarter. In the past, the company was used to have over 20% revenue growth. 

Its net income dropped to $555 million from $650 million, in which the management blamed to tax increases in key markets. 

The key challenge is that there are signs that the travel industry is starting to slow down after many customers embraced revenge travel a few years ago. 

Airbnb earnings ahead

The next important catalyst for the Airbnb stock price will be its earnings, which are scheduled to take place this week.

Economists expect that Airbnb’s results will show that its revenue rose to $3.7 billion in the third quarter, an increase from the $3.4 billion it made in the same quarter in 2023. This outlook is within the company’s guidance of between $3.67 billion and $3.73 billion. 

Its earnings per share is expected to come in at $2.14, which will take into account its marketing spending, which is expected to grow at a faster pace than its revenue. 

For the year, analysts expect that its revenue will jump to $11 billion, a 20% increase from 2023. It will then grow by 10.3% to $12.16 billion.

Analysts are broadly neutral on Airbnb stock, with the average estimate of $130 being higher than the current $136. This means that the company will need to continue delivering stronger results to justify more gains.

Airbnb trades at a forward P/E ratio of 33.35, higher than the sector median of 18.25, meaning that it is not a cheap company.

On the positive side, Airbnb has a chance to be more profitable since it has higher gross margins than the biggest hotel chains. It has a gross margin 82%, higher than Hilton’s 76%, while Marriott has 81%. These hotel chains have profit margins of over 30%. If Airbnb can achieve these margins, its valuation multiples would be justified.

Read more: Airbnb stock price is falling, and it could get worse soon

Airbnb stock analysis

ABNB chart by TradingView

The daily chart shows that the ABNB share price has been in a slow uptrend in the past few weeks. This rebound happened after it bottomed at $112, which coincided with the ascending trendline shown in black.

The stock has now moved above the 50-day and 100-day moving averages, meaning that bulls are in control for now.

However, the MACD indicator has formed a bearish divergence pattern. The stock has also formed what looks like a rising wedge pattern, a popular bearish sign. Therefore, there is a risk that the stock will pull back after it publishes its financial results this week. If this happens, it may drop and retest the support at $125.

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