ABNB shares haven’t budged much yet, but they are on the cusp after earnings
Airbnb (NYSE:ABNB) was one of the hottest tech unicorns for many years. However, it had the misfortune of trying to launch its initial public offering (IPO) in the era of Covid-19. Airbnb finally went public in December 2020, but amid all the travel uncertainties, shares of ABNB have performed underwhelmingly so far.
Yes, shares erupted in the spring as enthusiasm for the vaccine and the reopening increased.
However, ABNB stock has been in free fall since then, and given the difficult earnings season for many tech companies, it’s understandable that people are nervous ahead of the company’s earnings report on Thursday.
Equities have seen mixed trading since the results were released. However, ABNB shareholders should rejoice in both its earnings and those of its direct peers.
While Airbnb’s business model is unique, there are reasonable mixes to work with. For example, consider Reserve assets (NASDAQ:BKNG). Reservation shares rose 6% after good second quarter results.
Booking only reported a small operating loss for the quarter, which is a big improvement as it had used tons of red ink before.
The company’s hotel room bookings jumped 59% in the second quarter of 2021 compared to the first quarter, leading to the resumption of Booking. This is even more impressive than it looks, because generally the second quarter is slightly weaker than the first for Booking, according to CEO Glenn Fogel.
Plus, 59% is a huge sequential jump and indicates how quickly normal demand for leisure travel is returning. Fogel underlined a particular rebound in travel to Europe. We also see it with Airbnb. Airbnb reported that its cross-border European bookings have now surpassed 2019 levels.
Meanwhile, Expedia (NASDAQ:EXPED) reported a more mixed set of results. Stocks traded heavily ahead of the release of its results, but then fell after the results.
A closer look at the company’s numbers, however, showed accommodation to be solid, with vacation bookings in particular being a highlight. As much as Expedia was disappointed, this was in part because business travel did not recover quickly.
However, Airbnb is not as heavily influenced by business travel and indeed ended up experiencing the same favorable winds as Expedia did in the leisure sector.
Back to growth mode?
Airbnb reported a second quarter well above expectations and management said it expected its biggest numbers in the third quarter, even surpassing pre-pandemic levels. So, with the core business back on track, what else is making things happen for Airbnb?
A key element will be Airbnb’s investments in experiments and other ancillary businesses.
In 2019, Airbnb began to take a strong foothold in the experiences space, where travelers could purchase things like kayaking tours, coffee plantation tours, cooking classes, and more from guides. local. In theory, this would allow Airbnb to earn higher margins and diversify its product away from the competitive hosting space.
Sadly, the pandemic has put most of those plans on hold. However, the company has maintained the experiences to some extent through virtual events. Now, however, Airbnb should be able to start really pushing this potentially important revenue channel again.
Airbnb also had other activities underway, such as creating local transportation offerings. This has also been sidelined during the pandemic, but the company may be looking to revive that in the short term.
Meanwhile, there was at least one major benefit from the pandemic. CFO Dave Stephenson said the pandemic was a ‘reset’ time for many cities and local states when it came to regulation.
Cities like Barcelona have previously sought to ban or heavily regulate Airbnb. In the new post-Covid world, however, the regulatory environment has become more favorable to Airbnb as cities want their tourism sectors to get back on track by whatever means necessary.
ABNB actions verdict
Airbnb delivered strong results this quarter. Regardless of that, stocks haven’t moved much, at least not yet. This gives investors the opportunity to take a position in ABNB stocks ahead of management’s expectations which will be a blockbuster in the third quarter.
It’s not just Airbnb either. Looking at other travel agencies, it seems clear that the leisure and vacation industry is stabilizing quickly.
Despite all the uncertainties of the Delta and the other variants, things are returning to normal. This, in turn, should give Airbnb a solid trajectory in the months to come.
As of the publication date, Ian Bezek does not have (directly or indirectly) any position in any of the stocks mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.
Ian Bezek has written over 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a junior analyst for Kerrisdale Capital, a $ 300 million New York-based hedge fund. You can reach him on Twitter at @irbezek.