Airbnb, Inc. (ABNB) CEO and Chairman Brian Chesky sold 84,144 shares on December 5. The shares were sold at prices ranging from $132.89 to $135.68, for a total value of nearly $11.31 million. Following the sale, the CEO now owns 15.9 million shares of ABNB. The transaction was disclosed in a legal filing with the SEC.
Also, Brian Chesky made other trades recently. On November 6, he sold 30,000 shares of ABNB stock at an average price of $118.59, for a total value of approximately $3.36 million. On October 2, the CEO sold another 30,000 shares of Airbnb stock at an average price of $136.54, for a total value of nearly $4.1 million.
On September 12, Chesky sold 150,000 shares of ABNB stock at an average price of $150.06 for a total value of approximately $22.51 million.
Over the past year, of the 190 insider trades, 162 were ‘sell.’ of which 156 were sales.
The CEO’s recent stock sale has raised some eyebrows in the investment community. Insider selling is often seen as a negative sign, as it could indicate that those with the most insight into the company’s workings and growth prospects believe that its stock price is overvalued or may underperform in the future.
But at the same time, insiders may sell shares for reasons unrelated to their expectations for the company’s future performance. For instance, when insiders liquidate their shares at consistent points throughout the year, they are merely diversifying their holdings. Also, the remaining sizable position owned by the CEO demonstrates his confidence in the company’s prospects.
Shares of ABNB have gained more than 20% over the past month and nearly 14% over the last six months. Also, the stock has surged more than 49% over the past year.
However, let’s take a close look at the travel company’s fundamentals to gauge how its stock will perform in the near term:
Robust Performance in the Last Reported Quarter
For the third quarter that ended September 30, 2023, ABNB, an online marketplace for hospitality services, reported revenue of $3.40 billion, beating analysts’ estimate of $3.37 billion. This compared to the revenue of $2.88 billion in the same quarter of 2022. The total nights and experiences bookings were 113.2 million, more than the 99.7 million reported in the year-ago quarter.
The travel company’s income from operations came in at $1.50 billion, an increase of 24.4% from the prior year’s quarter. Its net income rose 260.3% year-over-year to $4.37 billion. It posted net income per share attributable to Class A and Class B common stockholders of $6.63, compared to the consensus estimate of $2.10, and up 270.4% year-over-year.
Furthermore, ABNB’s cash and cash equivalents stood at $8.18 billion as of September 30, 2023, compared to $14.86 billion as of December 31, 2022. The company’s current assets were $17.52 billion versus $14.86 billion as of December 31, 2022.
Mixed Analyst Estimates
Analysts expect ABNB’s revenue for the fourth quarter (ending December 2023) to grow 13.4% year-over-year to $2.16 billion. The consensus EPS estimate of $0.66 for the ongoing year indicates a 36.5% year-over-year increase. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
For the fiscal year 2023, Street expects Airbnb’s revenue and EPS to grow 17.3% and 198.7% year-over-year to $9.85 billion and $8.33, respectively. In addition, the company’s revenue for the fiscal year 2024 is expected to increase 11.4% from the previous year to $10.98 billion.
However, analysts expect the company’s EPS for the next year to decline 47.7% year-over-year to $4.36.
Bleak Fourth-Quarter Forecast
The home-sharing company expects fiscal 2023 fourth-quarter revenue to be between $2.13 billion and $2.17 billion, representing year-over-year growth ranging from 12% to 14%.
In a letter to shareholders, Airbnb said it is seeing enhanced volatility in the quarter after a record-breaking summer travel season during the third quarter.
“We are seeing greater volatility early in Q4, and are closely monitoring macroeconomic trends and geopolitical conflicts that may impact travel demand,” the company said. On a conference call with analysts, executives said that assessment wasn’t prompted by softness in a specific region, but rather by “broad-based” unpredictability across the board.
“It’s just a little too early to tell how much volatility we see” going into the fourth quarter, CFO Dave Stephenson told analysts.
Regulatory Challenges and Other Headwinds
On September 5, New York City implemented new short-term rental regulations, resulting in a “de facto ban” on Airbnb’s platform. This led to a sharp reduction in listings in the city, one of ABNB’s chief markets. Regulatory restrictions on room rentals are reportedly in place or may occur soon in global locales such as Florence, Paris, and Austria.
In addition, the Canadian government recently introduced new tax measures targeting short-term rentals, which will significantly target Airbnb.
Many analysts further predict an imminent U.S. housing market crash. Famous financial author Robert Kiyosaki, who wrote Rich Dad Poor Dad, reportedly declared on social media, “Airbnb to lead real estate market crash.”
Wall Street Analysts Cut Their Price Targets
Airbnb’s stock was downgraded by analysts at Jefferies Financial Group from a “Buy” rating to a “Hold” rating on November 29, citing concerns over the slowdown in booking, which increases the risk of not meeting consensus expectations. Analysts cut the stock’s price target to $140 from $155.
Also, analysts at JPMorgan Chase lowered their price target on ABNB from $130 to $118 and set a “Neutral” rating on the stock in a research note on Thursday, November 2. Needham & Company LLC slashed their price target on Airbnb shares from $160 to $150.
Elevated Valuation
In terms of forward non-GAAP P/E, ABNB is currently trading at 16.72x, 7.7% higher than the industry average of 15.52x. The stock’s forward EV/Sales of 8.27x is 590.2% higher than the industry average of 1.20x. Likewise, its forward EV/EBITDA of 23.02x is 135.4% higher than the industry average of 9.78x.
In addition, the stock’s forward Price/Sales and Price/Book multiples of 9.15 and 9.58 are significantly higher than the respective industry averages of 0.89 and 2.50. Also, its forward Price/Cash Flow of 21.60x is 127.6% higher than the industry average of 9.49x.
Solid Profitability
ABNB’s trailing-12-month gross profit margin of 82.67% is 133.1% higher than the 35.47% industry average. Moreover, the stock’s trailing-12-month EBITDA margin and net income margin of 23.59% and 56.87% are considerably higher than the industry averages of 10.91% and 4.48%, respectively.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 74.47%, 14.56% and 25.47% favorably compared to the respective industry averages of 11.40%, 6.04%, and 3.99%. Also, its trailing-12-month levered FCF margin of 29.96% is 483.2% higher than the industry average of 5.14%.
Bottom Line
ABNB reported stronger-than-expected revenue and earnings in the third quarter of fiscal 2023. The last reported quarter was a record-breaking summer travel season for its business, with financial performance helped by continued solid international growth.
However, the home-sharing company provided a weak forecast for the fiscal 2023 fourth quarter as it sees greater volatility, with macroeconomic headwinds and geopolitical conflicts impacting travel demand. Further, Airbnb continues to face regulatory challenges, and a famous author declared that the company would lead the housing crash.
Insiders are continuously selling shares with the most recent sale by Airbnb CEO worth $11.3 million, indicating declining confidence in the company’s performance in the future.
Amid increased insider selling, stretched valuation, and uncertain near-term prospects, investors could hold ABNB and wait for a better entry point in this travel stock.
