Why Is Airbnb Stock Falling?

ABNB: Airbnb logo

Vacation-sharing platform  Airbnb stock (NASDAQ: ABNB) has seen a big sell-off in recent months, losing almost 50% of its value since early April and has touched 52-week lows of about $90 per share. Although the travel industry has seen demand surge through the summer travel season with Covid-19 cases receding globally, there are concerns about whether this will hold up given a host of macroeconomic headwinds.  Surging inflation is putting pressure on household budgets and the Federal Reserve is also hiking rates at a more aggressive pace to keep prices in check. This could push the U.S. economy into a recession in the coming quarters. Moreover, website traffic for Airbnb and other online booking portals has apparently slipped from May to June, per an analysis by BTIG. Now, we haven’t seen the impacts of these macro factors on Airbnb’s financials just yet, as the company actually posted a strong set of Q1 results back in May while guiding for at least 52% growth in revenue over Q2. However, Airbnb stock is highly sensitive to macro factors, given its dependence on discretionary spending, and also due to the fact that it is a high-growth, high multiple stock.

So is Airbnb stock still a buy at current levels of around $90 per share? We think it is. With the recent sell-off, Airbnb currently trades at just about 7x projected 2022 revenues, well below the 20x multiples it traded at its peak. Even if there is a recession in the U.S., indicators do not point to it being very severe, given that household savings have risen considerably post the pandemic with major banks also remaining well-capitalized. Airbnb is also much better equipped to handle a downturn, compared to hotels, given its asset-light model and also given that its rates are typically cheaper compared to hotel rooms. We value Airbnb stock at about $145 per share, or about 11x our projected 2022 revenues for the company. Our price estimate is about 60% ahead of the current market price.  See our interactive analysis on Airbnb Valuation: Expensive Or Cheap? for more details. See our dashboard on Airbnb Revenue for an overview of Airbnb’s business model and how its revenues are likely to trend.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Jul 2022
MTD [1]
YTD [1]
Total [2]
 ABNB Return 3% -45% -38%
 S&P 500 Return 1% -20% 71%
 Trefis Multi-Strategy Portfolio 3% -25% 200%
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[1] Month-to-date and year-to-date as of 7/5/2022
[2] Cumulative total returns since the end of 2016

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