On Tuesday, PhillipCapital adjusted its stance on Airbnb Inc . (NASDAQ: NASDAQ:ABNB), downgrading the company's stock from a Neutral to a Reduce rating. The firm has set a price target for Airbnb shares at $120.00, maintaining their discounted cash flow (DCF) derived valuation.
The downgrade to Reduce reflects PhillipCapital's analysis of Airbnb's recent share price performance. Despite the downgrade, the firm has slightly increased its revenue and adjusted profit after tax and minority interests (PATMI) estimates for the fiscal year 2024 by 1%. This adjustment is due to expectations of higher average daily rates and interest income for Airbnb.
PhillipCapital has kept its weighted average cost of capital (WACC) at 7% and a terminal growth rate at 3.5%, which are integral to their DCF valuation model. These figures remain unchanged in their assessment of Airbnb's financial prospects.
The firm has expressed concerns regarding Airbnb's valuation, which it considers to be quite full at 31 times its fiscal year 2025 estimated price-to-earnings (P/E) ratio.
This valuation is significantly higher than the market average and exceeds that of Airbnb's online travel agency (OTA) competitors, such as Booking Holdings (NASDAQ:BKNG) and Expedia (NASDAQ:EXPE) Group, which trade at 24 times and 13 times their fiscal year 2025 estimated P/E ratios, respectively.
PhillipCapital anticipates an approximate 11% year-over-year earnings growth rate for Airbnb in fiscal year 2025. This growth rate is a key factor in their analysis and the resulting downgrade to Reduce from the previous Neutral rating.
In other recent news, positive developments have been observed for Airbnb Inc. The firm has reported a 10% increase in revenue to $3.7 billion in its third quarter, with net income rising to $1.4 billion. Airbnb's bookings have also seen growth, reaching 123 million nights and experiences.
The company generated $1.1 billion in free cash flow and repurchased $1.1 billion worth of shares, demonstrating confidence in its financial health.
Evercore ISI has maintained its "In Line" rating for Airbnb, based on encouraging October data from AirDNA, a short-term rental analytics company. However, the firm has cautioned that these projections are preliminary and may fluctuate with the remaining months of the fourth quarter.
Furthermore, Susquehanna has maintained a Positive rating on Airbnb and increased its price target to $160, up from the previous $130. The firm's analysis indicates a slight increase in the expected EBITDA and EPS for 2024, and a modest 1% increase in the 2025 revenue estimates.
Notably, they anticipate lower EBITDA in the fourth quarter due to Airbnb's ongoing investments. These are among the recent developments for the company.
InvestingPro Insights
Recent data from InvestingPro provides additional context to PhillipCapital's analysis of Airbnb (NASDAQ: ABNB). The company's P/E ratio stands at 47.23, which aligns with PhillipCapital's concerns about Airbnb's high valuation. This is further supported by an InvestingPro Tip indicating that Airbnb is "trading at a high earnings multiple."
Despite the valuation concerns, Airbnb's financials show some strengths. The company boasts impressive gross profit margins, with the latest data showing a gross profit margin of 83.07% for the last twelve months as of Q3 2024. This aligns with another InvestingPro Tip highlighting Airbnb's "impressive gross profit margins."
It's worth noting that while PhillipCapital has slightly increased its revenue estimates, an InvestingPro Tip suggests that "net income is expected to drop this year." This could potentially impact the company's valuation metrics going forward.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Airbnb, providing a deeper understanding of the company's financial position and market performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.