Airbnb’s (ABNB) lackluster stock performance isn’t anything new for investors who’ve been following it for a while. This year alone, it’s down nearly 8%. Over the last 12 months, it’s down 22%, and in the past five years, the company has lost around 13% of its value.
Late last week, Airbnb reported disappointing Q1 results with accompanying weak guidance for Q2. This raised concerns about travel demand potentially affecting the company’s growth story, particularly for a stock that’s arguably priced for growth. Domestic travel in the U.S. is softening with economic uncertainty affecting long-term booking lead times. Moreover, a decrease in foreign travelers impacts overall travel demand and undermines Airbnb’s core business.
While Airbnb’s bullish thesis has relied on its ability to expand market share, remain more resilient than its peers in tough macro conditions, superior pricing power, and upcoming product launches, I believe the current share price leaves little room for upside, especially if consumer spending weakens as the market expects. For now, I would take a more neutral stance on ABNB.
ABNB Negotiates Tough Quarter
Despite the EPS miss and modest headline numbers, Airbnb’s latest quarter was clearly soft but still showed some undeniable positives.
Some of the highlights included revenue growing 6% year-over-year, slightly ahead of estimates, while EPS came in at $0.24, which was right in line with expectations. For the coming quarters, Airbnb made it clear that it expects growth in nights and experiences booked to slow a bit compared to Q1, and ADR (average daily rate) on a year-over-year basis came in just a bit light versus what the market was hoping for.
Further demonstrating Airbnb’s fortitude is the company’s nights and experiences bookings, which grew 8% in Q1, while ADR fell 1% year-over-year to $171 from $173. In other words, the online marketplace squeezed sales revenues from existing businesses even while macro conditions deteriorated marketwide. That said, if you strip out foreign exchange headwinds, ADR would’ve actually risen 1% across all regions, mostly due to pricing power.
Now, while analysts like Scott Devitt at Wedbush saw this as a red flag and downgraded the stock to Neutral (citing slowing travel demand), others like D.A. Davidson’s Tom White are sticking with a Buy rating. His take is that Airbnb’s model is still more resilient than that of traditional travel players like hotels and airlines, especially in an uncertain macro backdrop.
What’s helping? The long-term trend of travelers shifting from offline to online booking platforms. That tailwind still has momentum, and in tougher economic conditions, platforms like Airbnb could continue to benefit as travelers hunt for more affordable, flexible options.
Why Airbnb Has More Up Its Sleeve
There are two more reasons to feel optimistic about better days ahead for Airbnb.
First is the company’s continued focus on affordability. Over the last two years, Airbnb has kept its average daily rates (ADR) flat, even as hotel prices keep climbing. In other words, Airbnb is maintaining a clear edge regarding cost-effectiveness—an advantage that is becoming more meaningful as consumers grow more price-sensitive.
The second point is Airbnb’s upcoming product cycle. On May 13, the company will unveil its 2025 Summer Release, which is expected to include the launch and expansion of new offerings. In fact, back in Q4, CEO Brian Chesky mentioned that Airbnb plans to roll out one to two new products each year, with each aiming to generate more than $1 billion in revenue within three to four years.
This could include broader travel experiences offered directly through the platform, potentially bundling services like car or boat rentals, flights, or other travel-related features in one place. The release may also include new tools for hosts and guests. This aligns with Airbnb’s long-term strategy to enhance the user experience and expand beyond just accommodations. Innovation has always been central to the company’s approach, and it continues to show signs of staying ahead of the curve.
In short, there’s a clear near-term catalyst here—the product launch—that could potentially shift the market’s expectations for Airbnb’s long-term growth. Analysts are projecting a 5-year EPS CAGR of 16.3% and a 5-year revenue CAGR of 8.5%. If the new initiatives land well, those estimates could move meaningfully higher, but there is a big “if” here for potential investors.
Is Airbnb’s Growth Worth the Premium?
Airbnb’s current share price warrants a closer look from a valuation standpoint. Consider the company’s ability to generate profits relative to its enterprise value. Airbnb has produced $2.5 billion in operating profits over the past 12 months. An enterprise value of $68.1 billion translates to an earnings yield of about 3.6%.
For comparison, risk-free investments yield around 4.3%, meaning investors are paying a premium for Airbnb’s future growth potential, even though current profits are relatively modest. That premium might be justified by the company’s strong operational leverage, as seen in its high projected EPS growth (16.3%) compared to more moderate revenue growth (8.5%). However, those projections are based on the current analyst consensus.
If Airbnb can continue growing at a healthy pace, gaining market share, improving operations, or launching successful new products, then the relatively low earnings yield might be attractive. Still, even though Airbnb has shown resilience despite a tough macro backdrop, it’s unlikely to be completely immune to a slowdown in travel spending. The company has already guided to a more modest Q2.
These factors suggest that Airbnb appears to be richly priced. There’s a limited margin of safety in the current setup, and while short-term tailwinds are on the horizon, it still might be too early to tell whether the long-term growth will fully justify the current valuation.
Is Airbnb a Good Stock to Buy?
At present, Wall Street analysts are more undecided than confident about Airbnb stock. Over the past three months, out of 37 analyst ratings on ABNB, 14 were bullish, 19 were neutral, and four were bearish. That said, ABNB’s average price target is $146.39, implying a 20% upside from the current share price.
The Right Moment to Book Airbnb
Fundamentally, Airbnb’s long-term story still looks solid. The company is arguably better positioned than many of its peers to weather a slowdown in travel demand, thanks to its pricing power and relatively healthy growth outlook.
The big question is whether now is the right time to own the stock, especially given its high exposure to cyclical travel trends. Valuation doesn’t look particularly compelling, and while some short-term catalysts are coming up, it’s still uncertain how sustainable the growth story is at current price levels. That’s why, for now, I think the best move is to stay on the sidelines and maintain a neutral stance on ABNB.