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Why Airbnb Stock Crashed Today -- Then Got a Little Better

By Rich Smith - Feb 23, 2021 at 12:22PM

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Yes, Airbnb got caught up in Tuesday's tech rout. But did you hear what happened on Monday?

What happened

Shares of virtual hotelier Airbnb (ABNB 3.53%) got caught up in the tech stock flash crash Tuesday morning, falling more than 10% in early trading as the Nasdaq fell 4%.

That's the bad news. The good news is that by 11:30 a.m. EST, things had settled down a bit. The Nasdaq recovered to "only" a 1.7% sell-off, and Airbnb is down "only" 5.2% -- and Loop Capital may be part of the reason for Airbnb's partial recovery.

Fortune teller moves hands over a crystal ball

Image source: Getty Images.

So what

Loop Capital, you see, upgraded Airbnb shares to "buy" yesterday, ahead of the company's first earnings report as a publicly traded company, due out Thursday, Feb. 25. Loop assigned the shares a $240 price target, which implies about 30% upside to the stock, according to StreetInsider.com.

"Bookings growth for other providers of alternative accommodations ... improved sequentially in 4Q," observes Loop, and that trend implies Airbnb could outperform expectations in Q4 2020, and it "continues into 1Q" 2021 as well.

Now what

The most intriguing part of Loop Capital's analysis -- for stock investors -- is this observation: Third-party analytics firm AirDNA has observed that "ABNB unit volume has shown strong directional correlation with UBER rideshare bookings over the 11-quarters of data on record."

Now, there are two conclusions an investor can draw from this observation (assuming it holds true in the future). First and foremost, Uber (UBER 4.81%) "beat earnings" but "missed revenues" when it reported earlier this month, a fact that could imply Airbnb will similarly disappoint on sales when it reports on Thursday. (This could mean that Loop is making a bad call in recommending that you buy Airbnb stock today).  

Perhaps more importantly, though, the fact that Uber schedules its earnings reports about 10 days before Airbnb's reports means investors may be able to get a sort of preview of how Airbnb performed in any given quarter simply by examining Uber's report beforehand.    

To put it more simply: Uber's earnings reports may give investors a sort of crystal ball, allowing them to peer 10 days into the future and see how Airbnb's earnings will turn out. Let's tune back in Thursday and see how that works out.

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Stocks Mentioned

Airbnb, Inc. Stock Quote
Airbnb, Inc.
ABNB
$114.30 (3.53%) $3.90
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
UBER
$23.10 (4.81%) $1.06

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