“Whopping”
Can Airbnb ever turn a profit?! (Oh, aside from the profits they’ve historically turned.)
Look, losing $3.9B in a quarter, as Airbnb just did in their first quarter as a public company, is a big number, no question. At the same time, the framing of this New York Times blurb on the results is silly:
Airbnb’s loss approaches the $5.2 billion lost by Uber in its first full quarter as a public company and renewed questions about whether unprofitable tech start-ups can turn a profit. Although most money-losing tech companies say that they are spending money to fuel fast growth, Airbnb’s shrinking revenue makes that argument a harder sell.
It’s true that Uber has yet to turn a profit — though they continue to make inroads there, and seems likely to later this year or next. And they may or may not have already had the world not completely shut down for the past 12 months, all-but eliminating Uber’s core business.¹
Anyway, that’s Uber, and it’s fair to question the company in that regard until they can prove otherwise, but lumping in Airbnb and trying to make this some sort of trend piece on unprofitable tech giants — never mind Amazon’s famous/infamous strategy in this regard — strikes me as decidedly silly.² Hell, you don’t even need to read between the lines for the story here — it’s right there in the paragraph above the one just excerpted:
The company brought in $859 million in revenue in the last three months of the year, down 22 percent from a year earlier. Its loss was driven by $2.8 billion in costs associated with stock-based compensation related to its I.P.O., as well as an $827 million accounting adjustment for an emergency loan it took out last year to weather the pandemic.
Simple math: $3.6B of the $3.9B loss was due to one-time charges. Every company that goes public has these³ — including Uber in that huge loss mentioned above. If you click on that link you’ll find:
For the second quarter, Uber said it lost $5.2 billion, the largest loss since it began disclosing limited financial data in 2017. A majority of that — about $3.9 billion — was caused by stock-based compensation that Uber paid its employees after its I.P.O.
Again, one-time. Those go away next quarter. And if you took them away this quarter for Airbnb, the picture was much brighter. Again, simple math: a $300M loss. Still a loss, but that’s actually a pretty incredible outcome given the pandemic and Airbnb’s core business. Something which, of course, is also directly responsible for the year-to-year revenue decline obviously.
With that in mind, you probably shouldn’t be shocked to see that Airbnb’s stock is trading up nearly 15% today on the earnings news. If you just read The New York Times attempted framing of the situation, you would be shocked. But it might also shock you to learn that in the years before the pandemic, Airbnb was actually a profitable company.
This is not complicated. Airbnb, a travel and experiences company, was one of the businesses impacted the most by the lockdowns over the past year. So much so that it derailed the original IPO plans. But the company rather miraculously found their footing (thanks in large part to local stays for people looking to break up the work-from-home monotony) and regrouped to still get out in the public market.
If you believe the world is going to open up again, and signs are finally looking very good in this regard, there are few businesses better situated than Airbnb to take advantage of this. And if that happens, the company is likely to quickly return to profitability. “Renewed questions about whether unprofitable tech start-ups can turn a profit”, aside.
¹ Disclosure: I am an Uber shareholder, and have been since the firm where I’m a partner, GV, invested back in 2013. But I remain one despite the bumpy ride in the public market because of the belief in the world swinging back to a state of normal and Uber being a key cog in that transportation picture once again.
² Non-Disclosure: I am not an Airbnb shareholder — though I’m tempted given the narrative I just spun and the negative view point above which I view as totally irrational. In a way, it reminds me of buying Facebook stock almost a decade ago as it went below $20/share. Or Snap stock in late 2019, as it approached $5/share. My reluctance is that unlike with those stocks, where the public market was being irrational, the public markets still love Airbnb stock despite the press narrative and it’s valued highly. But if you believe this is a transformational company in travel and experiences…
The above is not stock buying advice, by the way! I’m not a public stock market professional. This is just my own commentary as I think through what to do!³ Though no, not every company has the emergency loan charges — but again, we’re in the middle of a pandemic!
