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May 10, 2023

Airbnb (ABNB) and Rivian (RIVN) Report

Airbnb (ABNB) reported 20% revenue growth ($1.82 billion) and EPS of $0.18 last night (slight beat) and the stock is down around 10% mid-day today as the near-term growth outlook comes down. There are a lot of metrics to look at here but, big picture, it seems like the post-pandemic travel boom is easing somewhat and travelers are becoming a bit more price-conscious. There may be some business given up to (BKNG), but honestly, I think this goes back and forth somewhat depending on the quarter and analysts make too much of it.

In response to a potential slowdown, Airbnb is boosting its spending on marketing and platform improvements while rolling out initiatives to try and get hosts to lower pricing (average daily rate has held steady at around $168). In recent quarters the discussion has been more about how Airbnb can get more supply on its platform (+18% in the quarter, better than +16% last quarter). This quarter it was more about how it can spur demand.

Stepping back, I think Airbnb draws a lot of scrutiny and analysts are generally lukewarm on the stock while large investors are more excited by it. I didn’t love the quarter, but looking back at Airbnb growing by 70% in this same quarter last year, then by 58% in the next quarter, it’s pretty clear that this business is working off a much larger base than it was just 12 months ago. For this year and next, we should see around 15% annual revenue growth and annual EPS growth in the 15% to 30% range. I’m content to stick with the stock provided it doesn’t break down. Today, ABNB has bounced off its 200-day line (near 107), which is where it was about a month ago. Let’s hold on and see how the stock digests this report. HOLD

Rivian (RIVN) reported results yesterday that were better than feared as the company has taken steps to extend its cash runway while it ramps up production. Management also reiterated the full-year outlook, which seems more positive than some commentary from other EV startups as the industry grapples with softening demand and price cuts for some players, such as Tesla (TSLA), even though supply chain constraints appear to be easing.

Revenue of $661 million (+596%) was slightly above consensus, as was an operating loss of -$1.43 billion. Deliveries in the quarter totaled 7,946 units, about as expected. Rivian ended the quarter with $11.8 billion in cash, nicely ahead of the $10.6 billion expected from analysts. Capital expenses in the quarter were $280 million versus $489 million expected.

As far as putting everything in proper context, Rivian delivered 20,000 vehicles in 2022 while delivering an EBITDA (a measure of earnings before interest, taxes, depreciation and amortization) of -$5.3 billion. Management is calling for 50,000 deliveries in 2023 and EBITDA of -$4.3 billion.

Looking further down the road, Rivian is expected to generate revenue of around $4.1 billion (+146%) this year with an EPS loss of -$5.73, then generate revenue of around $8.16 billion (+100%) in 2024 with an EPS loss of -$3.59. It’s far from a slam-dunk investment, especially as price cuts may spread across the EV landscape. But we have a half-sized position and I think the stock has massive upside potential once we get through this garbage market. The stock is enjoying a modest rally today. Continue to hold half. HOLD HALF

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.