Airbnb share price flat ahead of Q4 earnings amid stifled travel industry

The Airbnb share price has been flat ahead of the company’s Q4 earnings announcement on 15 February. Analysts are forecasting positive earnings and revenue growth off the back of a record Q3 for the company. However, the emergence of the Omicron Covid-19 variant is expected to impact gross bookings.

Much like the travel sector, the Airbnb [ABNB] share price has struggled to rebound since posting record third-quarter (Q3) revenue and earnings in November 2021. However, as the vacation rental company prepares to announce its Q4 results on 15 February, investor sentiment appears to be strengthening.

Since posting market-beating financial figures on 4 November, shares in Airbnb have stagnated, declining 3.6% to $166.53 on 11 February. The stock has also been flat since the start of the year, despite analysts forecasting positive earnings and revenue growth.

Out of 10 analysts polled by Zacks Investment Research, the consensus estimate is for earnings to increase 100.5% year-over-year to $0.05 per share. Revenue is expected to jump 70.3% year-on-year to $1.46bn, which is between the $1.39bn and $1.48bn forecasted by Airbnb itself.

Brian Chesky, the founder and CEO of Airbnb, not only expects rebounding travel to support its financial growth but the wider shift to flexible working to revolutionise “how we live, work and travel”. During the company’s Q3 earnings call, Chesky also highlighted several trends off the back of the travel revolution, including increased rental demand due to more flexibility to travel, expanding travel destinations and increased long-term stays.

Travel tentatively recovers

The revival in international travel that began in early 2021 accelerated towards the end of last year as lockdowns in countries like the US and UK lifted restrictions, coronavirus pandemic case numbers dropped and the rollout of vaccines continued.

As the travel industry showed signs of recovery, Airbnb was uniquely positioned to benefit from holidaymakers and employees searching for a place to work remotely. “People aren’t just travelling in Airbnb. They are now living on Airbnb,” Chesky said during the earnings call.

The shift in behaviour increased the number of stays and experiences booked on the platform by 29% year-over-year to 79.7 million in Q3. Gross booking value jumped 48% year-on-year to $11.9bn off the back of the increase, lifting net income 280% from the year-ago quarter to $834m. The record- and market-beating quarter pushed the Airbnb stock price up 16.6% to above the $200 mark in the two days following the results announcement on 4 November 2021. 

However, the emergence of the Covid-19 Omicron strain in November last year is expected to have derailed the travel industry’s tentative revival. In addition, the prospect of higher inflation and interest rates, as well as soaring energy bills in many parts of the world, has weighed down Airbnb shares.

Is Airbnb’s stock overvalued?

The Airbnb share price has wavered during the past 12 months due to continued uncertainty. As of 11 February close, shares in the online travel platform have fallen 23.2% amid a broad market shift from growth to value.

The stock’s flat performance in the year-to-date is in stark contrast to the 13.4% annual gain in 2021, when Airbnb shares had reached a 52-week high of $218.78 during intraday trading on 16 February 2021.

With the stock trading significantly below its all-time high, the company’s market cap slipped to $105.8bn on 11 February. In comparison, competitors Hyatt Hotels [H] and Hilton Worldwide Holdings [HLT] are valued at $11bn and $42bn, respectively, following a 29% and 31.5% 12-month gain.

For Beth Kindig, a leading tech analyst and founder of the I/O Fund, Airbnb’s lofty valuation is trading at a premium to its financials. During an interview with Opto Sessions, she noted that companies like Zoom [ZM] and CrowdStrike [CRWD] took almost a year to absorb each stock’s premium opening prices. 

“The most extreme [example of this] is probably Airbnb. It was at an $18bn valuation and six months later, it had a $90bn valuation. It’s just not possible to gain that much in value that quickly with declining revenue,” Kindig said.

Wall Street looks to gross bookings

Looking ahead to Airbnb’s upcoming Q4 earnings announcement, general market sentiment appears to indicate that the company’s performance during the three months will have been impacted by the Omicron variant.

“It will be understandable if Airbnb reports a modest deceleration of the growth rate in gross bookings. After all, there was a surge of infection caused by the Omicron variant,” Parkev Tatevosian wrote in TheMotley Fool. “However, if there is a significant pullback in bookings on Airbnb, it could indicate a continued vulnerability whereby customer demand will contract with every new wave of Covid-19.”

Regardless, the consensus rating for the Airbnb stock price is to ‘outperform’, according to MarketScreener. Analysts polled by the platform also have an average price target of $190.69, representing a 14.5% rise from its 11 February closing price.