Shares of Airbnb, Inc. (NASDAQ: ABNB) plunged in the afternoon trading Tuesday after the stock received a downgrade from KeyBanc Capital Markets analyst Justin Patterson.
Patterson has downgraded Airbnb from overweight to sector weight, citing concerns over the waning travel demand following the pandemic. He noted that the leisure travel recovery is fading, which poses a potential risk to two crucial metrics for investors: room and night experiences (RNE) and average daily rate (ADR).
He conveyed his cautious outlook in a client note, stating,
“While the company has been benefiting from pent-up travel demand and changing traveler behaviors post-pandemic, we are cautious these tailwinds are slowing.”
Airbnb stock took a hit following the downgrade, falling by 6.47% to $127.73 in afternoon trading.
Airbnb, Inc. (NASDAQ: ABNB), headquartered in San Francisco, has built its reputation as a platform allowing property owners to transform their homes and buildings into short-term rentals. Thus far, Airbnb’s stock has appreciated by nearly 60% over the year.
This increase in stock value has been propelled by robust travel demand, which has led to an uptick in the average daily rate for Airbnb stays.
Patterson also remarked on this phenomenon, stating,
“Airbnb has experienced a prolonged period of ADR strength, which we characterize as from delayed recoveries across regions and in urban markets.”
However, he cautioned,
“With consumer spend on services materially outpacing goods, we expect a reversion is more likely than not.”
Furthermore, Airbnb could face additional challenges due to a New York City policy mandating local registration for all rental units offering short-term stays. Airbnb has vehemently opposed these regulations, dubbing them a “de facto ban” and even challenging them in court, albeit unsuccessfully.
Patterson noted,
“Restrictions in New York City — a popular New Year’s Eve destination — could accentuate q/q declines. Net, we believe it is more likely that Airbnb posts decelerating RNE growth into year-end, which makes street forecasts for 14% annual growth through 2025 too aggressive.”
