Editor's Note: Below is an excerpt from recent Gaming, Lodging & Leisure (GLL) research from our analyst team. For more info on our institutional research email sales@hedgeye.com

Airbnb Between a Rock and a Hard Place | $ABNB - 1029636 80d96da5a9baa8c34e76a7cb72075510

Airbnb (ABNB) embodies all the classic “great company, great industry, bad stock” attributes and resides on our Short Bias list.

At some point, it will make its way back onto our Long Bias or Best Idea Long list, but that pivot could be a ways off. Last night was further confirmation of the risks we had flagged for the company (see HERE and HERE).

ABNB’s stock faces headwinds from multiple fronts – growth is decidedly slowing on the volume side, growth will be slowing on the pricing side, marketing is ramping back up (see, it wasn’t just a one quarter pick up), valuation remains stretched (relative and absolute), and the company’s shareholder transition still has at least another six to nine months to play out. 

Reinvesting to accelerate growth and building out the brand in underpenetrated markets is the right approach for the long term – we credit Expedia (EXPE) and Booking (BKNG) for this, so we’ll credit ABNB for making the right business decision. The only difference here is that ABNB has been adamant about the sustainability of their marketing strategy the past two years, and the Street estimates came to reflect that dynamic.

Now, Street estimates need to reflect the new reality, and the marketing line should continue to de-leverage. The net effect is that RNs and Bookings estimates will probably be supported, but EBITDA needs to come down for ’23-’25. This move should appease the remaining growth investors in the coming quarters IF growth outperforms, but at the same time, slower growth in Q2-Q3 and potentially some model de-leverage is a net negative for both shareholder bases.

Hence our view that ABNB’s stock is stuck between a rock and hard place until it works through steeper comps and the Street accepts the marketing reality. For now, ABNB remains on our Short Bias list.  

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