Airbnb‘S (NASDAQ:ABNB) The first quarter earnings report was hot off the press on May 8. Despite solid gains at the top and bottom, investors sold the shares the next day as second-quarter expectations fell short. Shares lost 7%, a significant one-day sell-off for the tour guide.
Revenue rose 18% last quarter to $2.14 billion, ahead of the $2.06 billion consensus, while earnings per share more than doubled from $0.18 to $0.41, well above analyst estimates from $0.24. The increase in profit margins was partly due to a shift from the Easter holidays to the first quarter, strong interest income and the impact of sales growth and cost discipline.
While these results should have pleased the market, investors instead focused on second-quarter expectations, which called for a slowdown in sales growth to 8% to 10% as the Easter shift turns into headwinds. That slowdown appears to be temporary, however, as management said revenue growth would accelerate in the third quarter as the company benefits from events like the Summer Olympics and the European Championships.
The stock is now down 13% from its year-to-date peak and at its lowest point in almost three months. That presents an attractive buying opportunity, as Airbnb still has a long growth path ahead of it.
Let’s look at a few reasons to buy the dip in Airbnb stock.
Airbnb is gaining market share
Airbnb competes with hotels and other types of overnight accommodations, but its biggest competitors are other home-sharing platforms Expedia.com‘s VRBO.
But Airbnb already dominates the home-sharing niche with a leading market share among these platforms, and the company appeared to strengthen its position in the first quarter. Expedia revenue rose 8% in the period, while its B2C division, which includes VRBO, rose just 3%. The total gross booking of the accommodation increased by 4%. Expedia doesn’t release VRBO results, but did note headwinds in VRBO’s replatforming as the brand shifts under the Expedia umbrella, where users can take advantage of Expedia Rewards.
Competitors have been unable to overcome the powerful network effect on the Airbnb platform, which has allowed it to continue expanding its lead.
The platform gets creative with icons
In the summer update, Airbnb introduced one of its most original ideas yet: Icons. The company gives travelers the opportunity to stay in iconic places around the world and have truly unique experiences, such as a night at the Musee d’Orsay in Paris, or a stay in the house from Pixar’s hit film Upwards.
Icons are yet another way Airbnb differentiates itself from hotels and other home-sharing platforms. These ambitious experiences will elevate and strengthen Airbnb’s brand in travel and create buzz around its unique offering.
As CEO Brian Chesky has said, Airbnb is looking to expand beyond its core business, so investors can expect to see more of these new features in the future.
Make smart financial decisions
Airbnb is a growth stock, but after being chastened by the pandemic, management is running the company far more conservatively than many of its Silicon Valley peers, making wise financial decisions and controlling spending.
The company continues to return capital to shareholders and repurchased $750 million in shares last quarter. With a total of $2.5 billion in share buybacks over the past year, Airbnb has reduced its outstanding shares by almost 3% over that period. While 3% may not sound like much, this strategy only adds up over time and Airbnb should be able to increase the number of buybacks as profits grow.
Additionally, the company benefits from higher interest rates as it is on track to generate nearly $1 billion in interest income this year, providing a significant boost to its bottom line.
This top growth stock is performing like a business and benefiting from its superior financial position, which will reward investors in the long run.
Should you invest €1,000 in Airbnb now?
Before you buy shares in Airbnb, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Airbnb wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $550,688!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns May 6, 2024
Jeremy Bowman has positions at Airbnb. The Motley Fool has positions in and recommends Airbnb. The Motley Fool has a disclosure policy.
It’s time to buy the dip in this generational growth stock opportunity, originally published by The Motley Fool
