Airbnb shareholders sleep easy after earnings and revenue beats

Investors piled into Airbnb’s stock on 14 February after the company announced a six-fold increase in EPS, beating analyst expectations on earnings and revenue. The results marked the highest revenue and the largest profit in the company’s history, and the stock gained over 9% in the opening minutes of after-hours trading.

- Airbnb beats on earnings and revenue to complete record year.

- Strong demand was buoyed by China’s reopening.

- The Kelly Hotel & Lodging Sector ETF has gained 18.5% year-to-date.

The Airbnb [ABNB] share price rallied following fourth-quarter (Q4) 2022 results after markets closed on Tuesday. On top of beating revenue and earnings expectations for the quarter, the company also issued guidance for Q1 2023 that was in excess of analyst expectations, fuelling investor confidence.

Airbnb’s share price had fallen 30.09% in the 12 months to 13 February, but had already gained 36.16% through 2023. It rose over 9% within 15 minutes of the closing bell following the results.

The results closed off a record year for Airbnb, which attributed its successful quarter to a number of tailwinds. Chief among these was strong consumer demand, with nights and experiences bookings up 20% year-over-year. The number of tourists seeking breaks in foreign cities also increased, with cross-border trips up 49% year-over-year.

In a letter to shareholders, CEO Brian Chesky also highlighted the lifting of travel restrictions in China, hailing it as “an encouraging sign of continued recovery for the region”.

Earnings point to recovery

Diluted EPS increased 500% year-over-year to $0.48 for Q4, beating Refinitiv analyst expectations of $0.25 by 92%. Revenue of $1.9bn marked a 24% increase year-over-year and beat analyst expectations by 2.2%.

Full-year revenue of $8.4bn marked a 40% year-over-year increase and beat analyst expectations by 0.5%, in a record total for the company. Net income of $1.9bn for the year secured the company’s first year of GAAP profitability. Diluted EPS increased from -$0.57 to $2.79, constituting another record and beating analyst expectations by 7.7%.

Revenue guidance for Q1 2023 was put at $1.75-1.82bn, implying 16-21% year-over-year growth.

The shareholder letter acknowledged that Q1 2022 was hampered by the Omicron Covid-19 variant, as well as the onset of the war in Ukraine, making year-over-year comparisons for the first part of the quarter “easier” than the latter part. However, even the low end of this guidance is above the $1.73bn currently forecast by analysts for the quarter, which could explain why investors poured into the company’s stock following the results.

Prior to Airbnb reporting, Needham’s Bernie McTernan reiterated the firm’s ‘buy’ rating on the stock.

Speaking to Yahoo Finance Live, McTernan praised the restrained spending that Airbnb has stuck to since the pandemic: “They had major cost cuts happen in 2020, and that's the reason why they have 30% EBITDA margins now.”

McTernan didn’t specify a price target during the call. In August, however, the firm lowered its target from $220 to $150 while maintaining a ‘buy’ rating.

Growth ahead for the sector?

After a difficult period for travel companies, Airbnb’s positive results may be seen by many onlookers as indicative of an imminent recovery for the sector.

McTernan also referred to Expedia’s [EXPE] earnings report in explaining his positive stance. “The organic trends were solid,” he said, “with demand accelerating throughout December.” Despite this, Expedia still missed analyst expectations for Q4, making Airbnb’s positive results a welcome relief for investors.

January figures from Infiniti Research forecast a 7.7% CAGR for the global travel technologies market between 2023 and 2026. Tailwinds driving this growth include increasing usage of AI, machine learning and blockchain.

Funds in focus: Kelly Hotel & Lodging Sector ETF

Investors who wish to tap into the travel technology sector can select the ETFMG Travel Tech ETF [AWAY]. The fund has gained 14.5% year-to-date, but has fallen 27.1% over the past 12 months. Airbnb is AWAY’s fourth-largest holding as of 14 February, at 4.82% of assets under management (AUM). Expedia accounts for 3.89% of AUM.

However, investors seeking maximum exposure to Airbnb through an ETF may prefer the Kelly Hotel & Lodging Sector ETF [HOTL], which as of 15 February has allotted 10.86% of AUM to Airbnb. HOTL has also been outperforming AWAY, with gains of 18.5% year-to-date and a relatively modest fall of 5.6% in the past 12 months.

Analysts polled by Refinitiv gave a median 12-month price target of $132.00 for Airbnb, 9.2% above the 14 February close of $120.87.