Mizuho Securities has adjusted its outlook on Airbnb Inc. (NASDAQ: ABNB), reducing the price target to $170 from the previous $175, while retaining an Outperform rating on the stock.
The firm's analysis suggests that the current consensus expectation for a room night growth of 8% in the fourth quarter of 2024 may be overly optimistic, given the trend of shorter booking lead times that were observed in July, which moderated by six percentage points year-over-year.
The analyst predicts Airbnb will concentrate on affordability and quality of offerings to enhance its market position. The focus includes the deployment of price tools, ensuring price parity, and the elimination of low-quality listings. Such strategic shifts may lead to a postponement in advertising spend to support these pricing initiatives.
Additionally, while market expansion efforts are anticipated to continue into the fiscal year 2025, the company is expected to improve efficiency in other areas to balance potential margin pressures. Consequently, the analyst estimates that the profit margins will remain relatively unchanged year-over-year.
Mizuho's decision to maintain the Outperform rating but lower the price target reflects a recalibration of near-term estimates and the target multiple. This adjustment is based on 17 times the firm's fiscal year 2027 enterprise value/EBITDA estimate.
Despite risks to near-term revisions, Mizuho remains positive on Airbnb's long-term prospects, citing the low penetration of home accommodations and significant potential for growth in adjacent areas like Experiences and Advertising.
InvestingPro Insights
As Mizuho Securities revises its stance on Airbnb, a look at the latest metrics and insights from InvestingPro can provide additional context for investors. Airbnb is currently trading at a P/E ratio of 15.42, which is considered low relative to its near-term earnings growth, according to an InvestingPro Tip. This could indicate that the stock is undervalued, aligning with Mizuho's Outperform rating despite the lowered price target.
InvestingPro Data also shows Airbnb's impressive gross profit margin, which stands at 82.59% for the last twelve months as of Q2 2024. This high margin underscores the company's ability to maintain profitability, which is critical as it navigates through market expansions and efficiency improvements. Additionally, Airbnb's revenue growth remains robust at 15.59% over the same period, highlighting the company's continued scale in its core business.
However, it's important to note that 11 analysts have revised their earnings downwards for the upcoming period, a fact that might be contributing to the stock trading near its 52-week low. With this mixed picture, investors might want to explore the full range of 15 InvestingPro Tips available for Airbnb at https://www.investing.com/pro/ABNB to gain deeper insights into the stock's potential.
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