What happened
Shares of vacation rental management company Vacasa (VCSA) dropped 17.1% in February, according to data provided by S&P Global Market Intelligence. The stock had a late surge in January because of some dramatic changes to its business. But then the hype wore off and the stock slipped. However, it is important to note that Vacasa stock is still up and beating the market so far in 2023, even after February's drop.
So what
On Jan. 24, a regulatory filing from Vacasa showed that it had laid off 1,300 workers -- a whopping 17% or so of its workforce. Rob Greyber joined the company in September as CEO and went to work trying to fix operational issues. As Greyber said in his letter to employees announcing the layoffs, "We need to reduce our costs and continue to focus on becoming a profitable company."
Regarding profits, Vacasa has some work to do. Through the first three quarters of 2022, the company's revenue was up 39% from the comparable period of 2021. However, its operating loss during this time quadrupled to $70 million.
It seems the market was initially upbeat about Vacasa's increased focus on profitability, which is why the stock rose. But that initial optimism wore off in February.
Vacasa also got a fleeting boost when short-term rental platform Airbnb reported financial results in mid-February that showed strong bookings growth. Vacasa earns revenue by taking care of all aspects of managing vacation rentals and charging commissions on their rental income. Therefore, vacation demand is crucial for this company, and Airbnb's results suggest that industry trends are strong right now.
But the boost Vacasa stock received on Airbnb's results likewise proved temporary.
Now what
Vacasa will report its results for 2022's fourth quarter on March 14. Management is expecting revenue of $195 million to $215 million, up from $192 million in Q4 2021. Moreover, in terms of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), management is expecting a loss of $65 million to $75 million -- comparable to its adjusted EBITDA loss of $68 million in the prior-year quarter.
When Vacasa management reported its Q3 results, it said it was expecting bookings to drop in 2023. However, it didn't give official guidance. Perhaps it will be more optimistic in its outlook when it reports next week.
One thing investors should watch is how well Vacasa is able to manage its properties with a significantly smaller workforce. Management said, "We have crafted our choices to maintain the strong service levels." However, a lot goes into vacation rental management, and it will be challenging for the company to maintain its service standards with fewer people.
