Is Airbnb a buy on fee increase, international growth?

Key Points

• Airbnb's chart shows heavy-volume upside momentum, sending the stock into a buy zone.
• The catalyst for the surge was a cross-currency fee increase as Airbnb's international business grows rapidly.
• Analysts forecast $11 billion in revenue this year, an increase above what's expected for 2023, which the company reports in February.

Airbnb Inc. NASDAQ: ABNB is in a buy range out of a sloppy consolidation that began on July 31.

The Airbnb chart shows the stock’ heavy-volume upside momentum in the January 26 and January 29 sessions. The stock is approaching its late July high of $154.95 and the strong momentum indicates institutional buyers are jumping on board. 

The catalyst was the company’s announcement that it would add an extra fee for cross-currency bookings. 

Beginning in April, the guest service will increase to 16.5% from 14.2% for cross-currency transactions. Airbnb announced the change on its page detailing service fees.  

This fee adjustment coincides with the San Francisco-based company’s efforts to expand international business. 

"Great results" in new markets

In its third-quarter earnings report in November, the company said, “We’re investing in under-penetrated international markets and seeing great results. Following the success we’ve seen in recent quarters in Germany and Brazil, Korea has now become one of our fastest-growing countries compared to 2019, with gross nights booked 54% higher than they were in Q3 2019 on an origin basis.”

Cross-border nights booked grew by 17% year-over-year in the third quarter. The company said its Asia Pacific business has fully recovered to pre-pandemic levels.  

The company took down its Chinese listings in 2022, citing increased domestic competition, as well as the effects of pandemic closures. However, travelers going outbound from China are accounting for a much larger share of Airbnb revenue. 

 Small Asia-Pacific markets growing more than 30%

China outbound travel more than doubled in the quarter, while smaller Asia Pacific markets such as Taiwan, the Philippines, Thailand, Hong Kong, and Indonesia saw year-over-year growth above 30%.

North America still represents the majority of Airbnb bookings, but in the third quarter, the company only saw a modest acceleration in year-over-year growth in North American nights and experiences booked.

MarketBeat’s Airbnb analyst forecasts show a Barclays price target increase to $110 from $100 after the fee increase. That’s lower than where the stock is currently trading, but that’s not necessarily a ding on the stock.

Analyst price increases can be lower than the current stock price due to factors such as conservative projections, market uncertainties or gradual adjustments to reflect long-term growth expectations. Targets generally reflect expectations in the next 12 to 18 months; a lot can change in that time, and pullbacks are normal and to be expected. 

Additional $290 million in revenue

In other analyst actions, analysts at investment bank and financial services firm BTIG forecast the new fees could bring an additional $290 million in revenue for Airbnb this year.

Investors have found Airbnb stock to be mostly on a rollercoaster ride, not the sandy beach of a dream vacation. 

The stock has a beta of 1.69, meaning it’s 69% more volatile than the market average, as determined by the S&P 500, of which Airbnb is a component. 

It joined the large-cap index in September 2023. Airbnb replaced Newell Brands Inc. NASDAQ: NWL, which, with a market capitalization of $3.62, is more appropriately tracked in the SPDR Portfolio S&P 600 Small Cap ETF NYSEARCA: SPSM.

Airbnb is tracked with consumer discretionary stocks in the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY. In the past five sessions, Airbnb has been the third-best performer in the sector, behind just branded apparel maker V.F. Corp. NYSE: VFC and automotive component maker Aptiv PLC NYSE: APTV.  

Double-digit revenue growth, despite challenges

Airbnb’s three-year revenue growth rate of 18% has come despite a seeming ongoing onslaught of challenges, mostly pertaining to its business model. According to recent reports, which could be anecdotal, Airbnb hosts are converting their rental properties to long-term rentals, as they realize the costs associated with hosting are higher than they expected.

In addition, a growing number of communities are cracking down on short-term rentals, particularly in cities where housing is expensive and tourism is high. For example, New York City last year began enforcing rules that require all eligible short-term rental hosts to be registered with the city. 

The increasing regulatory challenges may be part of the reason behind the growing push internationally. According to Factset, analysts are forecasting Airbnb will fetch about $11 billion in revenue this year, which would be an increase over the $9.849 billion expected for 2023, which the company reports on or around February 13.