The Nasdaq Composite (^IXIC -2.05%) has been in a bear market for much of 2022, and many see the Federal Reserve as the primary culprit. With its aggressive series of interest rate increases, the prospects for capital-hungry growth stocks have gotten a lot less certain over the course of the year. And with the Fed expected to raise short-term interest rates yet again Wednesday afternoon, the Nasdaq wasn't able to mount much of a recovery from Tuesday's declines.
A downbeat financial report from travel disruptor Airbnb (ABNB -3.18%) weighed on investor sentiment, given the hope that a recovery in travel activity would prove to be a lasting supportive trend. However, an even bigger drop in the share price of ZoomInfo Technologies (ZI -1.52%) showed how vulnerable software-oriented companies still are even after sizable past declines.
Airbnb expects a slowdown
Shares of Airbnb were down about 5% in premarket trading Wednesday morning. The alternative accommodation platform provider saw amazing results in its summer quarter, but it projected that the future could see weaker conditions as macroeconomic pressures mount.
Airbnb's third-quarter financials were impressive. Gross booking value jumped 31% year over year to $15.6 billion, helping to boost revenue by 29% to $2.9 billion. Airbnb enjoyed its most profitable quarter in history, seeing net income of $1.2 billion that rose 46% from year-ago levels. The business also continued to generate considerable cash, with free cash flow coming in at $960 million.
Airbnb cited several contributing factors to its success. Guest demand remained strong; newer trends like long-term stays and travel beyond urban areas continued to support gains in volume. And the return of cross-border travel had a big influence on its numbers. Airbnb has also attracted a rising number of new hosts as deteriorating economic conditions have given property owners an incentive to seek new sources of income to shore up their finances.
Yet investors weren't satisfied with Airbnb's projections for the fourth quarter, which called for revenue of $1.80 billion to $1.88 billion. That would be up 17% to 23% from year-ago levels, and even though the numbers would be 62% to 70% higher than prepandemic levels in the fourth quarter of 2019, Airbnb's warning that booking levels might moderate seemed to strike a dissonant chord in investors' ears.
ZoomInfo zooms lower
Yet the biggest decline among Nasdaq stocks was in ZoomInfo Technologies, whose shares fell more than 25% Wednesday morning. The provider of sales-focused software reported considerable growth in its third-quarter financial results, but investors were more concerned about what the future could hold.
Many of ZoomInfo's numbers looked impressive. Revenue of $287.6 million was up 46% from year-ago levels. Adjusted operating income jumped more than 50% year over year to $118.4 million, helping contribute to adjusted earnings of $0.24 per share. Operating cash flow soared 84% to $85.7 million.
ZoomInfo's key business metrics also showed signs of ongoing strength. The company now boasts nearly 1,850 customers paying at least $100,000 in annual contract value to use ZoomInfo's services. Moreover, the business continues to forge partnerships in order to get the most up-to-date information to make its platform as useful as possible. ZoomInfo even boosted its revenue and earnings projections, now seeing full-year 2022 sales of $1.094 billion to $1.096 billion and adjusted earnings of $0.83 to $0.84 per share.
Yet in the conference call, ZoomInfo revealed its views on a more challenging environment that would likely hurt dollar-based net retention and growth figures in 2023. That's a common theme among SaaS stocks, and ZoomInfo might not be the last stock to fall sharply after revealing concerns about the year to come.
