Airbnb (NASDAQ:ABNB) recently posted its quarterly results, and they didn’t do much to inspire investors. The short-term rental site released its latest numbers earlier this month and revenue increased by 11% year over year, coming in at around $2.8 billion, which was slightly better than what analysts were expecting. The problem was on the bottom line, where the company’s adjusted earnings per share of $0.86 was lower than Wall Street estimates of $0.92.
What was also concerning for investors is that the company was seeing lead times for booking shrink, in a possible sign that demand may be softening, which could lead to weaker results in future quarters.
Airbnb stock has fallen 24% in the past month. The recent momentum has pushed the stock into oversold territory based on the Relative Strength Index (RSI), which is a momentum indicator which looks at trading activity, typically over the past 14 days. With an RSI of 24, that’s well below an RSI of 30, which is the cutoff for when a stock is considered oversold.
Investor fears are mounting that a recession may be coming in the future, and that could diminish the demand for travel, which could hurt a stock such as Airbnb particularly hard. At a more than $70 billion valuation and trading at a forward price-to-earnings multiple of 27, Airbnb isn’t a terribly cheap stock to own these days.
The danger for investors is that the stock could go lower if a recession does indeed take place. Airbnb can be a good investment if you’re willing to hang on for the long haul, but in the short term, you should brace for a bumpy ride.
