Airbnb's (Nasdaq: ABNB) The first quarter earnings report was fresh from the press on May 8. Despite strong impulses on the top and bottom lines, investors sold the stock the next day as Q2 guidance came up short. Shares lost 7%, a big one-day selloff for the travel leader.
Revenue rose 18% year over year to $2.14 billion last quarter, ahead of expectations of $2.06 billion, while earnings per share more than doubled from $0.18 to $0.41, far exceeding analyst estimates of $0.24. The rise in profit margins was due in part to the shift from the Easter holiday to the first quarter, strong interest income, leverage from revenue growth and cost discipline.
While these results should have pleased the market, investors instead focused on second-quarter guidance, which called for revenue growth to slow to 8% to 10% as the Easter shift became a headwind. This slowdown appears to be temporary, as management said revenue growth will accelerate in the third quarter as the company benefits from events such as the Summer Olympics and the European Cup.
The stock is now down 13% from its year-to-date high and at its lowest point in nearly three months. This represents an attractive buying opportunity as Airbnb still has a long growth path ahead of it.
Let's take a look at some reasons to buy the dip in Airbnb stock.
Airbnb is gaining market share
Airbnb competes with hotels and other types of overnight accommodations, but its closest competitors are other home-sharing platforms such as ExpediaVRBO.
But Airbnb already dominates the home-sharing sector with a leading market share among those platforms, and the company appears to have strengthened its position in the first quarter. Expedia's revenue rose 8% during the period, while its B2C division, which includes VRBO, rose just 3%. Overall housing bookings rose 4%. Expedia doesn't publish VRBO results, but it has noticed headwinds with the VRBO reconfiguration as it moves the brand under the Expedia umbrella where users will be able to take advantage of Expedia Rewards.
The competitors were unable to overcome the strong ones Network effect It is on the Airbnb platform, allowing it to further strengthen its leadership.
The platform gets creative with icons
In its summer update, Airbnb introduced one of its most creative ideas yet, called Icons. The company offers travelers the opportunity to stay in distinctive places around the world and enjoy truly unique experiences such as spending a night at the Musée d'Orsay in Paris, or staying in the home of a hit Pixar film. higher.
Icons are another way Airbnb uses to differentiate itself from hotels and other home-sharing platforms. These ambitious experiences will elevate and enhance Airbnb's travel brand and create buzz around its unique offerings.
As CEO Brian Chesky said, Airbnb is committed to expanding beyond its core business, so investors should expect more of these new features in the future.
Make smart financial decisions
Airbnb is a growth stock, but after being hammered by the pandemic, management is running the business more conservatively than many of its Silicon Valley peers, making prudent financial decisions and controlling spending.
The company continues to return capital to shareholders, repurchasing $750 million in stock last quarter. With $2.5 billion in total stock buybacks over the past year, Airbnb reduced its outstanding shares by approximately 3% during that period. While 3% may not seem like a lot, this strategy compounds over time, and Airbnb should be able to increase buybacks as earnings grow.
Additionally, the company is benefiting from rising interest rates because it is on track to generate nearly $1 billion in interest income this year, giving it a big boost to its bottom line.
This summit Growth stocks Operating as a business and benefiting from its superior financial position, this will reward investors in the long term.
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Jeremy Bowman He has jobs at Airbnb. The Motley Fool has posts on and recommends Airbnb. The Motley Fool has Disclosure policy.
It's time to buy the dip in this generational growth stock opportunity Originally published by The Motley Fool