Airbnb stock price analysis after earnings: buy or sell?

The Airbnb stock price rose in the extended hours as investors reacted to its strong financial results, which showed that its business was doing well. ABNB rose by 5% to $156, up from the closing price of $120. Still, the stock remains 26% below its highest level this year.

Airbnb stock rises as it boosts its guidance 

Airbnb, the giant vacation rental company, published stronger-than-expected financial results, which showed that its business was doing relatively well.

Its revenue rose by 10% in the third quarter to $4.1 billion, higher than the median estimate of $4 billion. 

It has become a highly profitable company, with its net income jumped to $1.4 billion, giving it a net income margin of 34%. The trailing twelve months free cash flow jumped to $4.5 billion.

Most importantly, the management boosted its forward guidance, a sign that it expects its business to do well over time. Its revenue will be between $2.6 billion and $2.72 billion in the fourth quarter, representing an annual growth rate of between 7% and 10%.

The company also boosted its profitability estimates, with the expected EBITDA margin coming in at 35%. 

Airbnb’s business is doing well in a difficult market, with the US now being in its longest shutdown ever, with over 1 million people not receiving their paychecks.

It is benefiting from some of the management’s initiatives, including the ‘reserve now, pay later’ option it launched in August. This differed payment option has, in particular, helped it grow its bookings in the United States.

Most importantly, its key markets in countries like India and Japan have continued rising this year. At the same time, its experiences business continued to thrive, months after the relaunch.

Airbnb’s results mirror those of other companies in the hospitality industry like Booking Holdings and Expedia which published strong numbers and boosted their forward guidance.

Airbnb continued to return cash to its shareholders as it repurchased shares worth over $857 million during the quarter, which brought its outstanding shares to 646 million, down from 681 million in the same period in 2023.

Share repurchases help to manage the impact of dilution and to boost the earnings per share. These repurchases are part of its $6.6 billion program, which is a substantial amount for a company valued at over $74 billion.

The company also has a strong balance sheet, with over $11.7 billion in cash and equivalents. It also has about $7.2 billion of funds held on behalf of its customers.

There are signs that the Airbnb stock is a bargain as it trades at a forward PE ratio of 24, which is in line with the S&P 500 Index. Its EV/EBITDA stands at 25, also lower than other companies with a large market share in their industries.

ABNB stock price technical analysis 

ABNB Stock chart | Source: TradingView

The daily timeframe chart shows that the ABNB stock price has come under pressure in the past few months as investors remained concerned about its growth trajectory.

It dropped from a high of $163 in February to the current $120, erasing billions of dollars in value. As it dropped, the company moved below the 50-day and 100-day Exponential Moving Averages (EMA).

Most recently, it formed an island reversal pattern, which explains why it rebounded after publishing its financial results.

Therefore, the most likely Airbnb stock forecast is bullish, with the initial target being at $130, the upper side of the island reversal pattern.

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