Sell Airbnb (ABNB)
We jumped into a half-sized position in Airbnb (ABNB) in January 2022 then filled the second half in August of last year. Since we’ve been in the position ABNB has never done well. And while I fully believe in the business model I have concerns about the stock’s potential over the next 3-6 months.
My main concern is that the company has been very focused on making bookings more affordable for travelers. One of the initiatives was to launch Airbnb Rooms on May 3, which seeks to bring more travelers onto the platform for low-cost, short-term stays. A number of other platform enhancements focus on pricing transparency so that travelers get a better sense of all-in costs before they book.
Don’t get me wrong, I think these are good features for travelers. But they’ll ultimately drive travelers to spend less on Airbnb’s platform and they show that traveler willingness to pay is on the decline, which is something that needs to be addressed. More volume at a lower price isn’t necessarily a win.
With a more cost-conscious consumer I think there’s a good chance revenue over the next six months will come in lower than expected instead of higher than expected. The company may operate more efficiently and grow earnings at a decent clip. But with this type of stock investors will want to see revenue growth.
The bottom line is I think the risks are skewed to the downside. We’re down 10% on our position. Let’s walk away now. There is potential that I’m dead wrong but that’s a “risk” I’m willing to take, especially given other opportunities I see out there. SELL
