Airbnb Earnings: Convincing Recovery Story Domestically – Vague Picture Internationally

Just like FedEx and GM, hospitality stocks hint at the pace of economic reopening. So relevant earnings reports are actually more than just scheduled releases of financial numbers. They offer us a lot of useful forward looking information.

Airbnb (ABNB) yesterday reported its Q2 2021 results. Let’s review them specifically from an overall economic perspective including travelers' sentiment angle. The company is still a newbie on the public market having been able to launch an incredibly successful IPO in the midst of the pandemic.

According to the published information, gross booking value of $13.4 billion in Q2 comfortably beat the consensus mark of $11.2 billion and $10.3 billion in Q1.

Revenue for the quarter was up a whopping 299% YoY, and it exceeded 2019 levels by 10% narrowing the company's loss to just $68 million. Nights and experiences booked rose 197% during the quarter to 83.1 million. Adjusted EBITDA profit was $217 million translating into a 16% EBITDA margin. This was more than $600 million of improvement in EBITDA from a year ago, and it represented 20 percentage points margin expansion from 2019. Looking ahead, Airbnb said it expects adjusted EBITDA margins to be higher in the second half than in the first half.

ABNB outlined in its press release: "We expect Q3 2021 to be our strongest quarterly revenue on record, finishing well above Q3 2019 levels. Our Q3 revenue as a percentage of GBV will increase substantially from Q2 due to the high concentration of check-ins expected in Q3." During the earnings call Airbnb's Co-Founder and CEO, Brian Chesky said “… now that Q2 is behind us, we can definitively say that the travel rebound is upon us, and Airbnb is leading the way. But as we predicted, travel is different than before.”

Although ABNB still trades above its 200-day moving average, shares of Airbnb are down 3.18% in today’s premarket trading to $151.15. What didn’t investors like in the presumably sound and promising ABNB’s report? First of all, whether COVID or not, recovery of the company’s margins still occurs in a more relaxed manner than it was promised at the time of its IPO. Although the U.S. domestic traveling is recovering quite robustly, the company’s main concern remains in its international segment, where margins have been traditionally higher due to prevailing bundles and packages. The company remains loss-making at the net level, and it becomes more and more evident that without a more consistent recovery of international tourism it would be next to impossible for Airbnb to meaningfully deliver. So, the bottom line while looking from the overall economic recovery ange is that full reopening, although definitely gaining momentum domestically, is yet to come at international level, where everyone sees an apparent shortage of credible forecasts. Consequently, we recommend to HOLD these shares at best.