Airbnb's 2023 Performance

Airbnb, much like the rest of the travel industry, had an exceptional year in 2023 as the demand for vacations skyrocketed. However, recent events have posed challenges for the short-term lodgings provider.

Despite missing earnings expectations due to an income tax settlement with Italy, Airbnb completed the successful year by surpassing revenue projections. For the fourth quarter, revenue experienced a 17% growth, reaching $2.2 billion, surpassing estimates of $2.16 billion. Furthermore, full-year revenue increased by 18% to reach $9.9 billion. Impressively, the number of nights and experiences booked saw a 12% year-over-year rise, totaling 98.8 million for the final three months of the year, marking the company's fourth-highest quarter ever.

However, looking ahead to the current quarter, Airbnb anticipates facing tough comparisons with the previous year, which may put pressure on its stock performance. The company expects a deceleration in the growth rate of nights and experiences booked compared to the strong fourth quarter, which saw a 12% increase. In fact, bookings surged by an impressive 19% in the first quarter of 2023.

While Easter falling in March this year may boost revenue growth for the first quarter, it could potentially impact the second quarter negatively.

J.P.Morgan analyst Doug Anmuth commented on Airbnb's situation, noting that despite stable demand trends, challenging comparisons and timing issues related to Easter might create some uncertainty. As a result, Anmuth maintained a Neutral rating on the stock.

The impact of this uncertainty was apparent after Airbnb's earnings announcement. Initially, the stock surged up to 9% during after-hours trading on Tuesday but was down more than 3% at $145.50 before Wednesday's opening bell. Nevertheless, the shares have seen an impressive 76% increase since the beginning of 2023, as of the previous day's market close.

Airbnb's Plan for Growth

According to FactSet data, Airbnb is currently trading at a 40% premium to its peers. As a result, the company recognizes the need to develop a plan for growth. To achieve this, Airbnb has launched an initiative to expand "beyond the core" and focus on underpenetrated international markets.

Airbnb acknowledges that this expansion will be a "gradual, multi-year journey," with further details about their plans set to be revealed later in 2024. However, investors and analysts were hoping for more substantial information at this stage.

D.A. Davidson analyst Tom White expressed his doubts about the impact of these expansion initiatives on revenue, stating that it is unlikely to be seen before 2025. With a more normalized growth trajectory expected for Airbnb's core accommodations business, he believes it may be challenging for the stock to maintain its current valuation premium compared to its peers. Consequently, White downgraded the stock from Buy to Neutral, while maintaining a price target of $145.

This sentiment seems to be the consensus among analysts, as Seaport Research analyst Aaron Kessler also shares a Neutral rating. Despite recognizing the company's long-term growth potential, particularly in international markets, and continued margin expansion, Kessler believes that the current valuation adequately reflects these factors.

In the wider online travel industry, Expedia saw a 0.8% rise ahead of the market open, while Booking remained flat.