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I think market saturation is the culprit here more than the economy.
Yes, despite the anecdotes ("my sister's brother's son's 3rd grade teacher said she canceled her vacation because of gas prices"), the data is clear on this and the data back up what you said.
Travel demand is still at record highs. Travel spending is still at record highs. Airbnb's earnings, Airdna's reports, etc. All still at record highs. But that growth just isn't matching the insane growth we've had in supply. So even as demand stays high, supply is growing faster, and tipping the supply/demand balance towards supply, whereas it was previously tipped towards demand.
However, that's not to say we won't hit a point economically where demand crashes like in 2008. Just that we're not there yet. Maybe we won't get there in this cycle and this supply/demand imbalance (which will correct itself as people move out of the space when they see they aren't getting the hot returns people last year got) will be the worst of it. Or maybe it's not even the beginning.
Meanwhile, Airbnb stock price is far from record highs. It’s down 50 percent, and so is vrbo last I checked.
Which makes perfect sense with context. Every techy growth stock is down massively. Most more on the order of 90% than 50%.
ABNB's P/E ratio is what changed (as did the entire market's with the sentiment shift towards huge P/E ratios), not their earnings.
Their P/E ratio was 127 before, which is obviously insane and was going to adjust alongside all the other mega growth stocks.
That’s a good point. Most aren’t down 90 percent, but yeah I get it.
Zoom - 86%
Shopify - 83%
Peleton - 95%
Facebook - 75%
Square - 82%
Roku - 90%
Upstart - 95%
Palantir - 78%
Alibaba - 80%
Paypal - 77%
Docusign - 85%
It's a bloodbath out there in that space. ABNB has held up better than most since, unlike a lot of the others, ABNB's earnings have stayed strong.
It’s still vastly underperforming the Nasdaq.
I mean, yeah, obviously. Forgive my rant here (I'm a stock guy so I tend to ramble). It's a growth stock in a high interest rate period designed to stunt growth. It's not in the same bucket as Amazon or Apple, it's in the same bucket as stocks like the ones above.
It's all moot anyway. The price of a stock is determined by a lot of things, including projected growth. It's not that Airbnb's earnings have dropped, it's that everyone realized the covid growth was unsustainable and not a good predictor of future growth, so P/E ratios and predictions of future growth/earnings needed to be adjusted.
I work in the markets and honestly the covid rage was the dumbest thing I've ever seen. Retail investors, whatever I get it, they were just buying hot stock tickers. But there were legit business people out there thinking "hmmm Zoom grew by 70% this quarter when the government mandated that all office buildings had to close and forced everyone to use video conferencing. If they can just keep that growth up for the next 10 years it will be a $10 Trillion company so lets buy this thing up to a 500 P/E ratio because those future earnings are a lock". As if every quarter was going to have some new worldwide catastrophe that was going to force everyone to use Zoom.
Same story with Airbnb (and all the rest). ABNB got a huge boost from pent up travel demand coming out of covid. A bunch of crazy people assumed that growth was the new normal, and bought the thing up way higher than it should have been.
It's not that ABNB demand or earnings have dropped, it's just that it stopped growing as fast and people realized "hmmm, maybe travel demand isn't going to double every 4 months for the rest of our lives". The fact that it's grown AT ALL from those elevated levels is pretty remarkable, really.
Put another way, Target will sell more stuff this quarter than they did last quarter, because the holidays are this quarter. But people aren't dumb enough to think "wow Target sold 30% more stuff this quarter than last, that means the stock is way underpriced because if they sell 30% more than that next quarter, then 30% more than that next quarter, then 30% more than that next quarter, and so on for the next 10 years the stock will be worth 100x what it is now, so let's buy it all the way up to 50x the current price".
Obviously that would be insane, because Target selling 30% more stuff this quarter than last is obviously just because of temporary holiday demand and not indicative of them growing by 30% every quarter for the next 10 years.
But when covid came along, and created the same kind of temporary demand, those kind of insane projections are EXACTLY what everyone thought to themselves. And they WAY overpriced the stocks because of it, and those prices came crashing down when people finally realized that growth was just essentially temporary holiday demand. Even if the companies (like Airbnb) are still just chugging along with solid impressive growth, they're not doubling every 5 months like people foolishly predicted. Travel demand is still at peak, it's just not setting new peaks as high and as fast as it was coming out of that pent up demand period. But that doesn't mean it's gone down. If/when it does actually go down, alongside this new supply glut, that's when the real fun begins.
