Airbnb stock has intrigued investors in top growth stocks since its Nasdaq debut in December 2020. From its initial public offering price of $68 per share, ABNB soared 223%. It hit an all-time high of 219.94 on Feb. 11, 2021.
The performance since then? Largely disappointing. But is the tide turning?
ABNB shares in February cruised to nine-month highs. And the stock jetted 13% higher on the day after the company released fourth-quarter results on Feb. 14.
In recent weeks, Airbnb stock has fallen sharply. Yet shares may be finding eager buyers near a key technical level, the 10-week moving average.
Clearly, ABNB is in base-building mode and trying to bottom out. So, is Airbnb stock a buy now? Or is it time to cut losses and sell?
This story analyzes all facets of the innovator in leisure travel in terms of fundamentals, technicals and mutual fund ownership. All of these elements get inputted into CAN SLIM, IBD’s research-driven seven-point paradigm for successful growth stock investing.
Airbnb Q4 Results
In a letter to shareholders, the company reported earnings of 48 cents a share, up 500% vs. a year ago and walloping Wall Street expectations for a profit of 25 cents. Revenue jumped 24% to $1.90 billion, also beating the consensus estimate.
The Q4 results extend a solid streak of heavy earning increases for the travel firm; Airbnb has posted a profit in five of the past six quarters. The top line grew 67%, 78%, 70%, 58%, 29% and 24% vs. year-ago levels over the same time frame. So, sales growth has decelerated in recent quarters, yet continue to hold at a fast clip.
“During the height of the pandemic, we made many difficult choices to reduce our spending, making us a leaner and more focused company, and we’ve kept this discipline ever since,” management commented in the shareholder letter. “We ended 2022 with 6,811 employees, and currently expect to continue hiring at a judicious pace in 2023. Compared to 2019, our headcount is down 5% while our revenue is up 75%.”
Airbnb posted full-year revenue rising 40% to $8.4 billion. Net income hit $1.9 billion for the year, the company’s first full year of profit on a GAAP basis.
Meanwhile, management projected first-quarter sales of $1.75 billion-$1.82 billion, up 18% to 23% vs. a year earlier, excluding currency impacts. The company also sees adjusted EBITDA margin to fall slightly year over “due to changes in the timing of our brand marketing spend.”
Airbnb Stock Today
In 2023, ABNB stock no doubt is off to a very brisk start.
On Feb. 15, following its earnings report, shares launched a breakaway gap. The stock surged 13% in the heaviest volume in three months.
Airbnb shares slumped almost 49% in 2022, much worse than a 33.1% decline by the Nasdaq composite. But 2023 is a different story so far. ABNB has not only vaulted as much as 69% since Jan. 1. ABNB stock is making even more price progress past an important technical level, the 50-day moving average.
Plus, the stock’s 50-day line has bottomed out and appears to be accelerating in its upward slope.
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Travel Sector Rebounding
In 2021, the travel industry faced the challenge posed by multiple strains of Covid-19, including the delta and omicron variants. But 2022 weaved a different yarn. Known cases of Covid-19 have fallen sharply in most continents. Many countries have completely ended quarantine and testing requirements for incoming travelers who show proof of full vaccination.
Heavy crowds at large airports across the U.S. during the summer last year pointed to a swell of tourism. And the autumn and winter travel seasons proved solid, based on comments made by large airlines on quarterly results. It appears that 2023 is off to a good start for the travel industry.
Delta Air Lines (DAL) rebounded after it issued fourth-quarter results, including a 42% jump in revenue. But shares have cooled off very quickly amid the government takeovers of both SVB Financial (SIVB) and Signature Bank of New York (SBNY). Hotel chain Hyatt (H) has galloped ahead more than 30% since Jan. 1 despite a recent pullback. But shares are now making a critical test of support at the 50-day line.
So in contrast with Delta Air and Hyatt, Airbnb stock shows more leadership lately.
Airbnb’s rebound came amid heavy negativity on Wall Street. In mid-December, Morgan Stanley downgraded Airbnb to underweight from equal weight and cut the price target to 80 from 110. Also, the weakened housing market has made a negative impact on the short-term rental market, according to this Wall Street Journal piece by Jessica Flint.
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Attractive Business Model
The San Francisco-based firm’s disruptive business model: Allow house and condo owners turn their properties into short-term rentals. The idea has hatched plenty of competitors. Even large hotel chains offer similar properties in addition to their standard lodging accommodations.
On Nov. 1, San Francisco-based Airbnb reported earnings of $1.79 a share in the third quarter, up 47% vs. a year earlier and well beyond the consensus view of $1.46. Revenue jumped 29% to $2.88 billion, also beating views of $2.84 billion. But the midpoint of the company’s Q4 top-line forecast of $1.80 billion-$1.88 billion fell slightly short of views.
“Growth in our supply compared to pre-pandemic periods was strongest in non-urban areas, where guest demand was highest,” the company said in a Q3 news release. “And as demand returns to cities, we also saw a return to growth in total urban supply.”
Recently, the Street has again boosted its full-year profit forecast for Airbnb to $4.31 a share, up 55%, and up 17% to $5.04 in 2024.
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Airbnb Stock Analysis: Is Relative Strength On The Mend?
Airbnb’s Relative Strength Rating has accelerated to a 91 in recent days on a scale of 1 to 99. The RS rating means ABNB now outperforms 91% of all companies in the IBD database over a 12-month time frame. Much better vs. a couple months ago.
You generally want to home in on companies that show an RS Rating of 85 or higher. Why? That way you’re selecting stocks already showing strength ahead of a potential breakout to new highs and a profitable price run. An 85 Rating means a stock is already ranking in the top 15% in terms of stock price strength. When it comes to picking high-flying growth stocks, those with superior price strength tend to make new highs, then keep going higher.
Moreover, MarketSmith data shows Airbnb stock’s 3-month RS Rating has firmed up to a 96, sharp on a scale of 1 to 99.
Keep an eye on the Accumulation/Distribution Rating. Airbnb gets a positive grade of A- on a scale of A to E. The proprietary Accumulation/Distribution grade measures the amount of heavy institutional buying vs. selling over the past three months. A grade of C+ or higher denotes net institutional buying over the past 13 weeks; a C- or lower points to net selling.
If you want a stock that is eagerly getting scooped by mutual funds, banks, college endowments and the like, prefer those with an A or B grade before you buy.
The 80 Earnings Per Share Rating rose from 74 after Q4 results. In most cases, you’d prefer companies with an EPS score of 80 or higher. The SMR Rating, analyzing sales, profit margins and return on equity, moved up to a C grade, neutral on a scale of A to E.
All in all, these individual ratings help explain why ABNB receives a vastly improved Composite Rating of 96 on a scale of 1 to 99. Typically, the best growth stocks wield a Composite score of 90 or higher at the beginning of their sharp price runs.
The I In CAN SLIM: Institutional Ownership
Fortunately, more mutual funds have decided to own ABNB stock over the past couple years.
MarketSmith data shows the total number of mutual funds owning a piece of Airbnb keeps rising. It hit a record 1,731 funds in the fourth quarter of 2022, up from 658 in Q4 2020.
Top funds holding a stake include Fidelity Blue Chip Growth (FBGRX), Hodges Retail (HDPMX), Jackson Square Large-Cap Growth (DPLGX) and Artisan Developing World (ARTYX). ABNB makes up 6.5% of Artisan Developing World’s assets.
Fidelity Contrafund (FCNTX), JPMorgan Large Cap Growth (OLGAX), Franklin Growth (FKGRX) and Wells Fargo Growth (SGRAX) — all members of the IBD Mutual Fund Index — hold positions. At the end of Q4, Contrafund grew its stake to 3.31 million shares vs. 3.12 million in September, according to MarketSmith.
Management owns 2% of Airbnb stock. The float, now at 396.7 million shares according to MarketSmith, has risen sharply. The float makes up almost 60% of the 648.7 million shares outstanding. So, individual investors should prepare for secondary offerings of closely held shares that could hit the stock in the future.
Why The 2021 Breakout Failed
From September to October 2021, a handle formed on ABNB’s deep cup pattern. This offered a proper entry point at 177.06. A handle simply denotes a relatively quiet pullback after a stock falls sharply in price, then rebounds close to all-time highs. This last shakeout of disgruntled or uncommitted holders clears the decks for a first-class breakout.
On Nov. 4, right ahead of Q3 results, Airbnb stock stretched past this aggressive entry. Then on Nov. 5, the stock staged a bullish breakaway gap.
This means the right time to buy shares was near 194, when Airbnb stock rallied sharply in that session’s first five minutes of trading, then kept going past the high of the first 5-minute intraday trading bar. Please read more about the technique of buying a breakaway gap in this Investor’s Corner. Buying breakaway gaps work best in a strong bull market, especially coming out of a deep or long correction.
But the threat of Covid-19’s omicron variant shook the world, and the stock dove sharply below the 177.06 and 194 buy points. The negative reversal forced new buyers to sell shares to keep losses small.
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Airbnb Stock Chart Analysis Today
In early February, ABNB completed a new cup base and formed a handle on the cup. This produced a valid entry point at 121.50, 10 cents above the handle’s highest price.
Given the gap-up at the market open on Feb. 15, an investor couldn’t purchase shares near the 121.50 handle buy point. So, was there an alternate buy point amid this surprise rally? Yes. Based on IBD research, powerful breakaway gaps following positive news suggest that the rally can only get stronger. Thus, looking at the early trading in Airbnb stock via an intraday chart, the first 5 minutes of trading showed ABNB hitting a high of 135. Once it surpasses this first 5-minute bar’s high, the stock can be bought.
It’s important to buy as close to the alternate entry as possible — in this case, no more than 5% above the 135 buy point.
For more on the breakaway gap, please check out this Investor’s Corner piece.
Amid a general decline in the major indexes, the alternate buy point did not turn out favorably. Indeed, alternate entries do not guarantee success, especially when market conditions get choppy. So, keep a close eye on changes in the IBD outlook on stocks. Remember, breakouts have the best chance of working when the outlook notes a confirmed uptrend.
Airbnb stock has now fallen back below the principal buy point of 121.50. If ABNB jumps sharply above this entry and volume heightens, it would be eligible for a new buy. Such positive price-and-volume action would indicate that fund managers are eagerly accumulating shares.
The 5% buy zone from 121.50 goes up to 127.57. Yet keep in mind that even after a tough year for stocks in 2022, the stock market remains choppy.
Thus, Airbnb stock is not a buy now. But the overall action in 2023 remains positive. Why? As the cup’s right side formed, ABNB notched several sharp weekly advances in heavy, above-average turnover. For instance, ABNB stock rallied 13% in higher turnover during the week ended Jan. 13. More weekly gains ensued in heavy or accelerating turnover.
Such price-volume action hinted at unabashed accumulation of shares by mutual funds, banks, hedge funds, large investment advisors, pension plans, college endowment funds and the like. To learn how to quickly spot such institutional demand, read more about the I in CAN SLIM at IBD University.
At some point, Airbnb may also stage a strong breakout to 52-week highs. When that happens, always stay disciplined with position management; cut losses short if the stock breaks expectations. William O’Neil, founder of Investor’s Business Daily, discovered during decades of research that the biggest stock market winners rarely fall more than 7% to 8% below a proper buy point.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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The post Airbnb Stock: Is It A Buy Or Sell? Here’s What Fundamentals, ABNB Stock Chart Action Say appeared first on Investor’s Business Daily.
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