What Happened:
Shares of online accommodations platform Airbnb (NASDAQ: ABNB) jumped 5.16% in the pre-market session after the S&P Dow Jones Indices announced that the company would be added to the index before the start of trading on Monday, September 18th. The S&P 500 is a widely followed index that tracks the performance of the 500 largest companies in the United States. Being included in the index means that Airbnb will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock. We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
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What is the market telling us:
Airbnb's shares are very volatile and over the last year have had 24 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 biggest move we wrote about over the last year was four months ago, when the stock dropped 10.6% on the news that the company reported first quarter results that beat analysts' gross bookings, revenue, earnings per share (EPS), and free cash flow estimates. However, room nights, revenue and adjusted EBITDA guidance for the next quarter came in below consensus, with the weak EBITDA guidance attributed to "changes in the expected timing of marketing spend relative to the prior year."
Additionally, full-year 2023 EBITDA margin will be similar to 2022, which is slightly below expectations and shows that the company will not be getting operating leverage on expenses this year. Overall, it was a negative quarter for the company given the outlook for the business.
Airbnb is up 66.1% since the beginning of the year, and at $141 per share it is trading close to its 52-week high of $153.33 from July 2023. Investors who bought $1,000 worth of Airbnb's shares at the IPO in December 2020 would now be looking at an investment worth $974.78.
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