Airbnb (ABNB -12%) dropped to 52-week lows after a rare earnings miss in Q2 and issuing downbeat Q3 revenue guidance. The company had previously provided light quarterly guidance, citing a more normalized travel environment in early May. This trend was echoed by peers in the travel industry, including Booking Holdings (BKNG, Financial), which recently warned of continuing normalization in travel demand, triggering a sell-off. Airlines have also been affected by the changing demand landscape. However, ABNB's soft Q3 guidance was worse than the market had anticipated.
ABNB expects Q3 revenues of $3.67-3.73 billion, roughly a 9% year-over-year improvement at the midpoint, indicating another quarter of weakening growth. Meanwhile, Nights and Experiences Booked, a key metric, is expected to moderate sequentially.
CEO Brian Chesky noted that the primary issue is lead times. During the first half of 2024, lead times were on par with 2023. However, in July, the company observed shrinking lead times, meaning travelers are not booking months in advance as frequently. Additionally, ABNB is seeing slowing demand from U.S. guests. The good news is that shorter lead times are still growing robustly, indicating that demand has not completely disappeared, but customers are hesitant due to an uncertain macroeconomic environment.
- A shaky global economy has been evident for the past few quarters, affecting Q2 as shown by ABNB's EPS of $0.86, which fell short of analyst expectations. Despite revenue growth of 10.6% year-over-year to $2.75 billion meeting estimates, it represented a sharp deceleration from the +17.8% posted in Q1.
- Nights and Experiences Booked expanded by 9.0% year-over-year, similar to the +9.5% posted last quarter, in line with management's forecast. Growth came from all regions, with underpenetrated markets leading the charge. Outside of ABNB's core markets (U.S., U.K., France, Australia, and Canada), gross nights booked significantly outperformed on average, highlighting the success of ABNB's global expansion plans. Bookings on ABNB's app also showed relative strength, jumping by 19% year-over-year and comprising 55% of total bookings, up 5 points year-over-year.
- While ABNB faces economic challenges, it is focusing on internal efforts. The company has removed over 200,000 listings over the past 16 months and plans to launch a new host service centered on co-hosting to unlock additional supply.
Concerns were growing ahead of ABNB's Q2 report that a softening travel market would impact quarterly performance. Unfortunately for ABNB, the situation was worse than the market feared, leading to a significant sell-off. Shorter lead times globally and slowing demand from U.S. guests present a challenging combination that may not easily reverse, even if interest rates are cut. This also paints a bleak picture ahead of Expedia Group's (EXPE, Financial) Q2 report tomorrow after the close.
