The Positives
+ 2Q22 revenue in line with forecasts. Airbnb met consensus estimates for its top line, posting US$2.1bn in revenue, representing a 58% YoY increase (64% YoY in constant currency). The growth was driven by a surge in booking volume and continued strength in daily rates. In 2Q22, the nights and experiences booked grew 25% YoY (up 24% vs pre-pandemic 2Q19) to 103.7mn, driven by continued recovery in urban and cross-border travel demand and improvement in business travel. 1H22 revenue/nights and experiences booked were at 44/49% of our FY22e forecasts.
+ Strong growth in long-term stays. In 2Q22, long-term stays (28+ days) remained the fastest growing category by trip duration as compared with 2Q19. Long-term stays surged 25% YoY and by almost 90% from 2Q19, driven by the rise of hybrid/remote work. Stays of more than 28 days now account for 19% of gross bookings volume, up from 13% in 2Q19.
+ Robust FCF generation and buyback authorization. Airbnb generated US$795mn of free cash flow (FCF) in 2Q22 and US$2.9bn of FCF in the last 12 months, ending 2Q22 with US$7.8bn in cash and cash equivalents. The company reported a net profit of US$379mn compared with a net loss of US$68mn in 2Q21, driven by top-line growth and an improved cost structure. Based on the strong performance, Airbnb announced a share repurchase program of up to US$2bn reflecting the management’s confidence about future growth and profitability.
The Negatives
– Soft 3Q22 guidance for bookings volume. Management said that booking volume slowed in May/June due to higher cancellations attributed to the flight disruptions, especially in the US. However, demand accelerated in July and Airbnb’s 3Q22 guidance calls for bookings volume growth to be similar to the YoY growth rate seen in 2Q22 (~25%). This implies nearly 100mn nights and experiences booked in 3Q22.
– APAC nights booked remain the drag. In Asia Pacific (APAC), booking volume remained depressed compared with 2Q19 due to cross-border reliance, tighter government restrictions and closure of its domestic business within China. Excluding Asia Pacific, global bookings volume would have exceeded 2Q19 levels by 35% in 2Q22 (vs overall 24%).
Outlook
Airbnb expects travel demand to continue. In 3Q22, Airbnb expects to report total revenue between US$2.78bn-US$2.88bn, representing YoY growth rate of 24-29%, and up 69-75% compared to 3Q19. Adjusted EBITDA margin is also expected to be 49% driven by a disciplined cost structure and top-line growth.
Downgrade to NEUTRAL with unchanged TP of US$119.00
We downgrade Airbnb to NEUTRAL from BUY after the recent run-up in share price. We maintain our DCF target price of US$119 (WACC 6.8%, g 4%) as our FY22e estimates remain unchanged. Macro uncertainties like rising inflation could weigh on discretionary demand for travel, but we believe Airbnb is a strong brand and could emerge as a preferred vacation option compared to hotels as it’s safe amid the spread of COVID-19, more affordable, and closer to home.
Important Information
This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE
Where the report contains research analyses or reports from a foreign research house, please note:
