Shares of online accommodations platform Airbnb (NASDAQ:ABNB) jumped 5.3% in the morning session after the latest inflation data from the Bureau of Statistics revealed that US consumer prices rose 3.2% in October, slightly better than the expected 3.3%. That's down from 3.7% in September and a peak of 9.1% in June of last year. Additionally, key categories such as food at home, electricity, and gasoline rose even less than the headline 3.2%. In fact, gas prices decreased year on year. This suggests that inflation is gradually easing, which is positive news for investors and consumers. The Federal Reserve has been raising interest rates to combat inflation, and the latest data indicates that their efforts may be paying off. However, inflation is still above the Fed's target of 2%. Regardless, the lower-than-expected inflation numbers could give the Fed more room to keep rates lower. As a reminder, lower rates are a tailwind for stock valuations, especially tech companies where the market needs to discount back cash flows further out in the future.
In addition to the macro tailwinds, the company announced the acquisition of AI startup Gameplanner.AI. According to CNBC, citing unnamed sources, the deal is valued at just under $200 million. Gameplanner.AI was cofounded by Adam Cheyer, one of the founders of Siri. This could prove to be a helpful and long-term positive acquisition because because AI could improve discovery on the platform, leading to a better customer experience. for example, hotels have a limited number of room types/sizes/layouts. ABNB listings are all different, with associated reviews. AI and LLM could help users better surface what they like and what they are looking for.
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What is the market telling us:
Airbnb's shares are very volatile and over the last year have had 18 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 6 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 47.5% since the beginning of the year, but at $125.24 per share it is still trading 18.3% below 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 $865.21.
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