Airbnb's Share Price Drops After Second Quarter Results

After releasing the results of its second-quarter earnings, Airbnb's (NASDAQ: ABNB) share price increased by 4.62%. However, as investors had more time to digest the results, they decided to sell their shares, resulting in a decline of 4.7%. The company reported some solid results in line with analyst expectations.

What were the key points from Airbnb's earnings release?

Q2 revenue grew by 58% year-over-year (YoY) to $2.1 billion, driven by a combination of growth in Nights and Experiences booked and continued strength in average daily rates. Revenues also exceeded the same quarter's sales in 2019 by 58%. However, this was lower than the previous quarter's revenue growth of 70%.

The company also announced that this was its most profitable quarter after declaring a net income of $379 million or a net profit margin of 18%. This is an increase of $676 million compared to Q2 2019 due to revenue growth and a decline in expenditure. Airbnb's 18% net profit margin is significantly higher than the -5% margin in Q2 2021. 

Free cash flow of $795 million was the highest level Airbnb had ever achieved in its second quarter. This is up from $782 million in the prior year and from $121 million in Q2 2019. This increased Airbnb's cash and cash equivalents to $9.9 billion and aided management's decision to repurchase $2 billion of the company's shares. However, this free cash flow is substantially lower than the $1.2 billion recorded in the first quarter of this year. 

Airbnb's bookings were lower than analyst estimates. The company recorded more than 103 million nights and experiences booked, which is 3.4 million less than the Wall Street consensus. Gross booking value had increased by 27% YoY to $17 billion, but this was lower than the 67% growth rate recorded in the first quarter of this year. 

What impact did Airbnb's earnings have on its share price?

Airbnb reported respectable figures in its second-quarter earnings report, but that didn't stop its share price from falling by 4.7% today as investors expected higher growth rates. In most situations, year-over-year growth rates were very impressive, but several figures were lower than those recorded in Q1, causing investors to question the sustainability of the wave Airbnb is riding. The company's stock has declined by roughly 35% this year and almost 47% from its all-time high last year. The decision to approve a $2 billion share buyback is at an ideal time for the company as this means it can buy more shares cheaply, thereby having a more positive effect on the company's depressed share price.