Airbnb Downgraded by Phillip Capital

Investing.com — Phillip Capital downgraded Airbnb from Neutral to Reduce on Tuesday, citing high valuations and limited near-term upside due to rising operational costs.

Airbnb reported strong Q3 2024 results, with revenue increasing 10% year-over-year to $3.7 billion, boosted by robust summer travel. However, Phillip Capital raised concerns about Airbnb's valuation, stating it trades at a significant premium compared to the market and OTA rivals like Booking Holdings (NASDAQ:BKNG) and Expedia (NASDAQ:EXPE) Group.

Airbnb's current price-to-earnings (P/E) ratio for FY 2025 stands at 31x, in contrast to Booking’s 24x and Expedia’s 13x, leading Phillip Capital to declare that valuations seem quite full.

The downgrade followed Airbnb's reported adjusted net profit after minority interest (PATMI) of $1.4 billion, reflecting a 15% decline from the previous year, attributed to increased marketing and product development costs, as well as a 21% rise in operating expenses.

Despite strong demand in key markets such as Brazil and the Asia-Pacific region, with notable growth in bookings from China, Phillip Capital remains cautious about Airbnb’s future profitability, especially as the company continues to invest in its brand and offerings.

For Q4 2024, Airbnb forecasts a 9% year-over-year revenue growth to $2.4 billion, with an anticipated sequential improvement in booking volumes. Nonetheless, the firm expects adjusted EBITDA margins to contract by approximately 600 basis points due to higher investments, reducing the margin to 27%.

Looking ahead to 2025, Phillip Capital noted that Airbnb’s aggressive investment strategy in expanding its market presence and product development will likely limit margin growth, thus making it difficult for the company to justify its current high valuation.

Phillip Capital maintains a price target of $120 on the stock, reflecting its cautious outlook on Airbnb’s valuation.