Airbnb (ABNB) Stock Falls 5% on Analyst Downgrade

Following perhaps one of the most inauspicious public market debuts, Airbnb (NASDAQ:ABNB) — which specializes in short-term homestays and experiences — fought valiantly against macroeconomic forces. After receiving a much-needed lifeline from the revenge travel phenomenon, however, ABNB stock now finds itself struggling again. This time, it’s due to an analyst downgrade.

Specifically, Morgan Stanley analyst Brian Nowak just offered a perspective that contrasts sharply against current consensus earnings estimates. Per Barron’s, the analyst believes Airbnb has reached a maturation phase. Subsequently, growth may slow from here, potentially putting an end to Airbnb’s otherwise remarkable performance given the pandemic backdrop. In response to this news, ABNB stock initially fell 5%. It has since pared back losses to around 3% as of this writing.

To boot, Nowak cut his rating on Airbnb to “underweight” from “equal weight.” Further, the analyst sliced his price target to $80 from $110. Against the time-of-writing share price, the new forecast implies a loss of about 11%.

Getting down to the details, Nowak noted that while active listings have grown about 12% per year from 2018 to 2022, this rate may slow to 7% annually through 2025 based on the law of large numbers.

As if that isn’t enough, the analyst also zeroed in on occupancy rate estimates. Currently, this metric stands at about 35% this year. While Nowak believes improvements are on tap, the rate may be more modest than in prior years. This is due to the “scale of the platform, uncertainties about the quality of incremental listings, and worries that some new listings might not be in desirable locations.”

ABNB Stock Faces New Macro Challenges

Back amidst pandemic-related lockdowns, Airbnb’s main challenge centered around Covid-19. Today, though, economic fallout represents a core headwind for ABNB.

Last month, Reuters reported that the “outlook for airlines has darkened as the post-pandemic boom in travel wears off and recession looms.” Indeed, should air travel diminish, the dynamic will lend greater fundamental credibility to Nowak’s concerns about ABNB stock.

Although supportive measures like stimulus checks initially bolstered confidence among U.S. consumers, this tailwind might also crater. For instance, since hitting a peak in April 2020, the personal saving rate has declined precipitously (save for a few spikes) through the latest read of October 2022.

Credit card debt further compounds matter for ABNB stock. While consumer loan liabilities initially plunged following the onset of the new normal, this metric now pings at all-time highs. In fact, the Washington Post recently warned about rising debt and higher fees.

Essentially, it’s not a great time for large swathes of the consumer base to spend on discretionary services. This also worryingly affirms Nowak’s hesitation toward ABNB stock.

On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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