What happened
Shares of Airbnb (ABNB +0.67%) were down more than 10% as of 1:48 p.m. ET on Wednesday after the vacation rental website delivered disappointing guidance for the fourth quarter. The company beat revenue and earnings estimates for the third quarter, but investors viewed the weaker-than-expected revenue guidance as a sign that the travel recovery might be showing early signs of decelerating.
The stock is down 41% year to date, but is the post-earnings drop an overreaction?
NASDAQ: ABNB
Key Data Points
So what
Airbnb trades at a high valuation, which means the market is sensitive to any signs that revenue growth could decelerate in the near term. Slowing momentum in the travel recovery seems to be what investors are focused on today. Indeed, management's fourth-quarter revenue guidance of $1.84 billion at the midpoint was slightly below the Street's estimate for $1.85 billion.
Nonetheless, the key performance metrics look solid. Airbnb notched a 25% year-over-year increase in nights and experiences booked, which helped drive the company's most profitable quarter ever. Revenue grew 36% year over year on a constant currency basis, pushing net profit up 61%.
Now what
The market might be putting a bit too much in the slightly lower revenue guidance. CEO Brian Chesky noted on the earnings call that the backlog in the fourth quarter is strong, even with the macroeconomic headwinds. He cited the record guest demand last quarter that drove over 90 million guest arrivals, and the longer lead times heading into the final quarter of 2022.
The growth implied in management's guidance looks solid as well. Management expects revenue to increase between 23% to 29% year over year excluding the impact of foreign currency, and that's with a difficult comparison to last year's fourth quarter.
