The Ratings Game: Airbnb’s stock slumps after KeyBanc downgrade on expectations for a pullback in leisure travel

by | Oct 3, 2023 | Stock Market

KeyBanc downgraded Airbnb Inc.’s stock on Tuesday, saying leisure travel is expected to pull back after a strong recovery from the peak pandemic years, pressuring two key metrics for the vacation rental platform. The downgrade sent the stock
down 2.8% premarket.

Analysts led by Justin Patterson downgraded the stock to sector weight from overweight, or the equivalent of buy, and said they see elevated risk for room nights and experiences, or RNE, and average daily rates, or ADR. “Airbnb has experienced a prolonged period of ADR strength, which we characterize as from delayed recoveries across regions and in urban markets,” the analysts wrote in a note to clients. “With consumer spend on services materially outpacing goods, we expect a reversion is more likely than not.” KeyBanc is expecting Airbnb’s near-term earnings to fall short of Street expectations, starting in the fourth quarter where consensus estimates call for a roughly 11% decline in RNE from the third quarter, vs. pre-COVID norms of 12% to 13%. “Further, restrictions in New York City — a popular New Year’s Eve destination — could accentuate quarter-on-quarter declines,” the analysts wrote, referring to the implementation of Local Law 18 on Sept. 5, which imposes severe restrictions on short-term rentals in the city. The city no longer allows Airbnb hosts to rent homes unless the owner is present and no more than two guests are permitted at a time. Lawmakers have argued that the many short-term rentals available on the platform were fueling a housing shortage and contributing to …

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