What happened
Shares of Airbnb (ABNB -0.74%) were down today as worries about an economic slowdown appeared to sweep the market a day before the vacation rental website released its third quarter results. Additionally, a Wall Street analyst issued a bearish rating for the travel industry.
As of 10:06 a.m. ET, the stock was down 4.7% while the Nasdaq had lost 1.2%.
So what
Investors appear to be bracing for another 75 basis point hike in the federal funds rate ahead of the Federal Reserve’s rate decision on Wednesday. Mortgage rates have jumped over the past six months, which has impacted Airbnb operators, especially professionals who manage multiple listings. Social media sites are full of anecdotal reports of Airbnb rentals now for sale, and a number of operators have complained that local markets have become too saturated.
Additionally, higher interest rates are expected to cool the economy, and travel spending tends to be discretionary, meaning consumers would likely spend less on Airbnb during a recession.
In an analyst note this morning, Bernie McTernan of Needham said that a vacation rental tracking tool based on listings on VRBO, Vacasa, and Evolve showed that supply growth in the industry is slowing and VRBO listings actually declined sequentially in October. This could be for seasonal reasons, because Airbnb is taking market share, or because supply growth in the industry is waning after a boom over the past year in the travel recovery.
Now what
Airbnb is expected to report strong results tomorrow afternoon for the third quarter, its seasonal peak. Analyst consensus calls for revenue to rise 29% to $2.84 billion and earnings per share to rise from $1.22 to $1.46.
However, given the stock’s high valuation, investors will likely be alert to any signs of weakness in its forecast. If the company misses the mark there, the stock could take a hit.
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