What Happened:
Shares of online accommodations platform Airbnb (NASDAQ:ABNB) jumped 6.5% in the afternoon session on continued optimism two days after the company reported solid fourth-quarter earnings that beat analysts' gross bookings and revenue expectations on better-than-expected 'Nights & Experiences Booked' (a key volume metric). Adjusted EBITDA also beat. Looking ahead, the company guided to adjusted EBITDA margins of "at least 35%" due to investments in "incremental growth opportunities," below expectations of a margin slightly over 36%. Bulls would argue that with better-than-expected demand, the company should be investing to take share and build the brand. Bears may argue that lower margins are always a negative.
Separately, Airbnb's peer, TripAdvisor (NASDAQ:TRIP), also reported strong earnings results that exceeded Wall Street's expectations for revenue and EPS.
These results continued to highlight the solid demand for travel services. During Airbnb's Q4'2023 earnings call, management highlighted this, with the quarter recording the highest growth rate of the year for first-time bookers. As a result, Airbnb reiterated its focus on investing in under-penetrated international markets, with plans for expansion in Switzerland, Belgium, and the Netherlands. There is also the longer term bull case that the company is an AI beneficiary, with the technology helping the company improve customers' experiences in lodging discovery and search.
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What is the market telling us:
Airbnb's shares are very volatile and over the last year have had 12 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 20 days ago, when the stock gained 5% on the news that the company revealed plans to increase fees charged to guests for cross-currency bookings. This means that whenever a guest pays for a booking using a different currency from the one set by the host, there would be an additional fee of as much as 2%. The company noted that the additional fee could result in a guest service fee of up to 16.5% of the booking subtotal.
More important than the details of the fees associated with cross-currency bookings is the bigger-picture international volume opportunity. This news is likely increasing bullishness among investors that Airbnb is focused on expanding into new markets to meet the growing demand for its offerings. Notably, during the Q3'2023 earnings call, management highlighted the improved momentum in the international market as cross-border nights booked grew 17% compared to the previous year. In a letter to shareholders, the company added, "As international travel continues to recover, we're building greater momentum for Airbnb in under-penetrated markets. In Asia Pacific, our business has fully recovered to pre-pandemic levels, with gross nights growing 23% in Q3 2023 compared to Q3 2019. China outbound travel increased over 100% in Q3 2023 compared to a year ago. Smaller Asia Pacific markets such as Taiwan, the Philippines, Thailand, Hong Kong, and Indonesia all experienced year-over-year growth above 30% for gross nights booked on an origin basis."
Airbnb is up 17.3% since the beginning of the year. Investors who bought $1,000 worth of Airbnb's shares at the IPO in December 2020 would now be looking at an investment worth $1,090.
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