• 1H23 revenue/PATMI was within expectations at 46%/32% of our FY23e forecasts because of seasonality weakness. In 2Q23, PATMI rose 71% YoY to US$650mn. We expect Airbnb to demonstrate strong profit growth in 2H23e supported by busy summer travel and higher operating leverage.
• Airbnb expects 3Q23e revenue growth of 14% to 18% YoY. Management also guided for a modest sequential acceleration in YoY growth rate of booking volumes. For FY23e, adj. EBITDA margin is anticipated to be modestly higher than FY22 of 35%.
• We downgrade to ACCUMULATE from BUY recommendation after the recent jump in its stock price. We raise our DCF target price to US$152.00 (prev. US$143.00) with a WACC of 7% and terminal growth of 4%. We increase our FY23e revenue/PATMI by 3%/8% to account for higher average daily rates and interest income. We believe Airbnb is well-positioned to benefit from shift towards alternative accommodations as it offers record levels of active listings on its platform, benefits from travelers looking for long-term stays, and is more family and group travel-friendly.

The Positives

+ Revenue beats guidance. In 2Q23, revenue grew by 18% YoY to US$2.5bn, ahead of the company’s guidance range of 12% to 16% YoY growth. Revenue growth was mainly driven by 11% YoY surge in booking volumes and 1% YoY increase in the average daily rates, or ADRs, to US$166. Cross-border bookings grew by 16% YoY as international travel is accelerating, accounting for 45% of gross nights booked. Urban nights booked increased by 13% YoY as guests are returning to cities, representing 48% of gross nights booked. In addition, guests are staying longer, with stays of 28 days or more accounting for 18% of gross nights booked driven by the flexibility granted by remote work.

+ Listings reach record high. In 2Q23, total active listings on Airbnb platform grew by 19% YoY to 7mn. Management highlighted that the growth came across all market types (urban and non-urban), with the highest growth rates in Latin America and APAC regions. We believe strong supply growth was led by continued product improvements and marketing to attract new hosts. In May, Airbnb introduced 50+ features and upgrades as a part of its 2023 Summer Release, including Airbnb Rooms, Monthly Stays, and pricing tools that enable hosts to compare their listing prices to the average rates of smililar listings nearby.

The Negative

– Deceleration in booking volumes. In 2Q23, the nights and experiences booked grew by 11% YoY to 115.1mn compared with 19% growth rate in 1Q23 and 25% in 2Q22. The deceleration was mainly because of tough comparisons due to pent-up travel demand (post-Omicron) seen in 2Q22.