What Occurred:
Shares of online accommodations platform Airbnb (NASDAQ:ABNB) bounced 5.8% in the early evening session after stocks rallied as traders continued to anticipate really accommodating policy decisions from the Fed in the coming months. Taken care of Chair Jerome Powell said in a speech, “It would be premature to close with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease…” Nonetheless, the market seems to disregard these comments for the present despite them coming from the Fed Chair. The Central bank has been raising interest rates to combat inflation, and the latest data showed that their efforts might pay off. As a result, there seems to be increased optimism in the market that because inflation is stabilizing, interest rates could stabilize or try and move lower. As a reminder, lower rates are great for stock valuations, especially for tech companies where the market needs to discount back cash flows farther later on. At the point when the math is finished to discount these cash flows back to today, a lower assumed discount rate leads to higher present values.
What is the market telling us:
Airbnb’s shares are extremely volatile and throughout the past year have had 18 moves greater than 5%. In setting of that, today’s move is indicating the market considers this news meaningful however not something that would fundamentally change its perception of the business.
The previous big move we expounded on was 17 days prior, when the organization gained 5.3% on the news that the latest inflation data from the Agency of Statistics uncovered that US consumer prices rose 3.2% in October, slightly better than the normal 3.3%. That’s down from 3.7% in September and a pinnacle of 9.1% in June of last year. Additionally, key categories such as food at home, electricity, and gasoline rose even less than the headline 3.2%. Gas prices decreased year on year, truth be told. This suggests that inflation is steadily easing, which is positive news for investors and consumers.
The Central bank has been raising interest rates to combat inflation, and the latest data indicates that their efforts might pay off. Nonetheless, inflation is still over the Federal Reserve’s target of 2%. Regardless, the lower-than-anticipated inflation numbers could give the Fed more space to keep rates lower. As a reminder, lower rates are a tailwind for stock valuations, especially tech companies where the market needs to discount back cash flows farther later on.
In addition to the large scale tailwinds, the organization reported the acquisition of AI startup Gameplanner.AI. According to CNBC, citing anonymous sources, the arrangement is valued at just under $200 million. Gameplanner.AI was cofounded by Adam Cheyer, one of the founders of Siri.This could end up being a useful and long haul positive acquisition because AI could improve discovery on the platform, leading to a superior customer experience. for instance, hotels have a limited number of room types/sizes/layouts. ABNB listings are different, with associated reviews. AI and LLM could assist users with better surfacing what they like and what they are looking for.
Airbnb is up 56.9% since the beginning of the year, however at $133.09 per share it is still trading 13.2% underneath its 52-week high of $153.33 from July 2023. Investors who purchased $1,000 worth of Airbnb’s shares at the IPO in December 2020 would now be looking at an investment worth $920.25.
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