Airbnb, Inc (NASDAQ: ABNB) shares have weakened from $129.38 to $117.59 in less than twenty-four hours and closed the week at $118.75.
The risk of further decline is still not over, especially if the U.S. stock market enters a more significant correction phase.
The current global economic situation indicates stagnation or contraction
Airbnb operates an online marketplace for lodging, primarily homestays for vacation rentals and tourism activities. Airbnb shares have weakened more than 5% this Friday, and probably it is not the best moment for investing in this company.
The current global economic situation indicates stagnation or contraction, while the surging energy crisis in the EU and China’s zero-COVID policy continue to impact Airbnb’s growth.
CEO Brian Chesky also recently said that in order to see further kind of quarter-over-quarter acceleration, Airbnb needs to see a recovery in Europe.
Europe is facing a serious cost of living crisis, and Airbnb’s exposure to Europe indicates that a large part of its revenues will be experiencing weakness.
Airbnb doesn’t disaggregate what proportion of its revenues comes from Europe, but in 2021 approximately 30% of its total revenues came from Europe, the Middle East, and Africa (the largest part is from Europe).
Further, Airbnb is positioned in a sector where the technology is becoming consistently cheaper to develop, and many competitors may try to imitate the platform or entice some of Airbnb’s clients to move to their services.
As governments navigate housing shortages, they may institute higher taxes on ABNB rentals and make the business less viable for hosts in many corners of the world.
Airbnb listing is still relatively cheap, but in the case of higher taxes on ABNB rentals, Airbnb could be increasingly faced with the issue of listing hosts that want to avoid paying a higher fee to the company.
Now let’s take a look at fundamentals. With a market capitalization of $79.96 billion, Airbnb is not undervalued, and compared to Hyatt Hotels, Airbnb is more expensive on a price-to-sales basis.
According price-to-sales ratio (market capitalization/revenues), Airbnb shares are trading at 10.8, which is more than two times higher than the price-to-sales ratio of Hyatt Hotels Corporation, which is trading at a P/S of 4.27.
It is also important to mention that Booking Holdings, which is growing at a comparable rate as Airbnb, trades at less than six this year’s sales and less than eighteen times TTM EBITDA.
Airbnb trades at more than fifty times TTM EBITDA, the book value per share is less than $10, and the current risk/reward ratio is not good enough for “value” investors.
Airbnb shares have weakened more than 5% on Friday, and the risk of further decline is still not over.
Data source: tradingview.com
The chart above shows that Airbnb price has been in a strong bearish trend since April 19, 2022. The price has currently moved below the 10-day moving average, indicating that the bottom is still not reached.
If the price falls below $110 support, it would be a firm “sell” signal, and the next target could be strong support at $100.
On the other side, if the price jumps above $140 resistance, it would be a signal to trade Airbnb shares, and the next target could be at $150.
Airbnb shares remain under pressure, and if the U.S. stock market enters a more significant correction phase, the share price could be at much lower levels. Airbnb trades at more than fifty times TTM EBITDA, the book value per share is less than $10, and the current risk/reward ratio is not good enough for “value” investors.
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