Airbnb (NASDAQ: ABNB) is expected to release its fiscal 2021 fourth quarter results on February 15. The international travel facilitator is gaining momentum as people get vaccinated and consumer mobility increases.
Yet COVID-19 disease is unpredictable and evolving. The rise of the omicron variant has created a wave of infections in some parts of the world, threatening to slow Airbnb’s momentum. When it releases its fourth quarter results, investors will want to look at gross book value to see if the omicron variant of COVID-19 had a meaningful effect.
Growth in bookings despite omicron may free Airbnb stock from pandemic fears
Remember that Airbnb does not own or operate any physical property that people can book on its website. Instead, it simply rounds up hosts and guests and takes a percentage of the transactions. That said, many people plan their trip months in advance and try to book their preferred location early.
Airbnb defines gross reservation value as the dollar value of reservations on the platform during a period and includes host revenue, service fees, cleaning fees, and taxes, net of cancellations and changes occurring during this period. The metric is insightful for observing customer demand for its services for the upcoming quarters.
Airbnb reported gross booking value of $11.9 billion in its third quarter ended Sept. 30, up 48% from the same quarter in 2020. More impressively, it was up 23% from compared to the same quarter in 2019, showing a healthy recovery from pandemic-related downturns in 2020.
It will be understandable if Airbnb reports a slight deceleration in the growth rate of gross bookings. After all, there was a wave of infection caused by the omicron variant. While this would not reduce consumer enthusiasm for travel, it would reduce their ability to do so due to travel restrictions that require negative COVID-19 tests.
However, if there is a significant pullback in bookings on Airbnb, it could indicate an ongoing vulnerability in which guest demand will contract with each new wave of COVID-19.
What this could mean for Airbnb investors
Wall Street analysts expect Airbnb to post revenue of $1.46 billion and earnings per share (EPS) of $0.03. If it achieves this revenue projection, it would be a 69.80% increase over the same period a year earlier. And the EPS estimate would be a dramatic turnaround from last year, when it lost $10.84 per share.
The stock is down 5% year-to-date 2022. It appears that before Airbnb’s stock can take off, it must overcome the risks associated with COVID-19. One way to prove to the market that the virus no longer poses a significant threat to operational performance is to generate robust booking growth despite the omicron variant.
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