Keybanc analyst Justin Patterson downgraded Airbnb Inc (NASDAQ: ABNB) from Overweight to Sector Weight.
The analyst highlights that the margins have reached a near-term peak, and revenue growth could decelerate as consensus works as room night (RNE) and ADR growth moderates.
The analyst's new 2024E and 2025E EBITDA are below the Street. Patterson believes this could create an overhang on shares as ABNB transitions from a growth to a GARP investor base.
Patterson's call is that leisure travel has experienced a material recovery from 2021-2023, resulting in outsized margin expansion. The analyst sees elevated RNE and ADR growth risk as these tailwinds fade.
ADR risk is more elevated today. Airbnb has experienced a prolonged period of ADR strength, which the analyst characterizes as delayed recoveries across regions and in urban markets.
With consumer spending on services materially outpacing goods, Patterson expects a reversion is more likely than not.
Near-term, Street RNE expectations appear too high. Patterson believes this risk begins in 4Q, where consensus projects an ~11% Q/Q decline vs. pre-COVID-19 norms of 12-13%.
Further, restrictions in New York City-a popular New Year's Eve destination-could accentuate Q/Q declines.
Net, Patterson believes it is more likely that Airbnb posts decelerating RNE growth into year-end, which makes Street forecasts for 14% annual growth through 2025 too aggressive.
Given material margin expansion over the past three years, ADRs' positive impact on margin, and renewed investment needs, it is more likely margins are guided flat-to-down Y/Y in 2024 than for an increase (Street currently projects +100 bps Y/Y).
Net, Patterson lowered his 2023, 2024, and 2025 EBITDA forecasts by 1%, 8%, and 5%, respectively, reflecting more modest bookings growth. He now projects $3.5 billion, $3.8 billion, and $4.4 billion, respectively, which assumes RNE growth of +14%, +13%, and +12%, respectively, and revenue growth of +16%, +11%, and +12% Y/Y, respectively.
Further, Patterson projects modest take rate growth in 2025 from new services. Based on his lower EBITDA forecast, he views fair value as $138.
Price Action: ABNB shares traded lower by 5.28% at $129.35 on the last check Tuesday.