Stock for online lodging and experiences marketplace Airbnb Inc. (ABNB) is in the red compared to its IPO value in 2020. With the company laying down the law in recent years to protect its hosts and bottom line, the stock is experiencing added pressure. Airbnb’s latest move permanently bans all parties at properties booked through its app.
Following the all-encompassing party ban, will ABNB stock suffer, or is its poor outlook simply attributable to the pressure on the wider stock market?
Airbnb places a permanent party ban in sweeping move.
Airbnb announced on Tuesday, June 28 it will make permanent a temporary party ban already in place. The temporary ban has been in effect since August 2020 and resulted in a 44-percent drop in party reports YoY, according to the company.
In a blog post, the company added, “The ban has been well received by our host community and we’ve received positive feedback from community leaders and elected officials. As we build on this momentum, we believe the time is right to codify this policy.”
Here's what Airbnb's party ban policy really says
In the temporary party ban, Airbnb capped gatherings at 16 people regardless of house size. This was to control gatherings during the heightened risk of COVID-19. The permanent Airbnb party ban has removed this cap for homes that can fit at least 16 people comfortably. This includes villas, castles, vineyards, and more.
Airbnb will take violations seriously. “In 2021, over 6,600 guests were suspended from Airbnb for attempting to violate our party ban,” the company said. It is working to implement considerations for specialty and traditional hospitality venues.
How ABNB stock is faring amid the changes
ABNB stock is down 2.37 percent from market open on Tuesday, June 28. This adds to a 42.64 percent drop YTD and a 28.87 percent downward trend since going public in December 2020. ABNB shares are trading at $99.07, which is below the IPO price of nearly $140 per share.
Airbnb has been struggling to maintain shareholder value for a while now, and its difficulties aren't solely attributable to a mere party ban. However, larger economic and sociopolitical issues like travel safety, hyperinflation, and a potential recession are all contributing to slowed growth for the company.
Airbnb is managing to hold its ground despite a widespread bear market and an even tougher time for the tech sector. Still, upward momentum is still an if in the near term for ABNB.
A forecast for ABNB stock
According to the Trefis Team, made up of MIT engineers and Wall Street analysts, “Airbnb’s asset-light, high operating leverage business model, should enable it to be very profitable in the long run, as revenues continue to expand. The company is also likely to see less of an impact from the surging inflation compared to other gig economy players, given the lower labor intensity of its business. Airbnb is also likely to post its first full-year profit in 2022 and this could also prove a catalyst for the stock in a market where investors are increasingly prioritizing earnings and cash flows.”
Analysts on TipRanks predict a 73.65 percent upside for ABNB stock, which would eventually put it in the green, though broader economic and social conditions may stall that growth. As for the now-permanent party ban, it shouldn’t have a long-term impact on ABNB stock.