Now is the time to buy the dip in this generational growth stock opportunity

Airbnb‘S (ABNB -0.50%) The first quarter earnings report was new to press on May 8th. Even though sales and earnings remained strong, investors sold stocks the next day because of the lack of second-quarter guidance. The stock fell 7%, a significant one-day selloff for the travel leader.

Last quarter, revenue increased 18% year-over-year to $2.14 billion, beating market expectations of $2.06 billion, and earnings per share more than doubled from $0.18 to $0.41, well above analyst estimates of $0.24. Yes. The surge in profit margins was partly due to the Easter holiday shift to the first quarter, strong interest income, and leveraging revenue growth and cost discipline.

These results should have pleased the market, but investors were instead focused on second-quarter guidance that called for a slowdown in revenue growth to 8% to 10% as Easter changes turned into a headwind. However, the slowdown appears to be temporary, as management said sales growth will accelerate in the third quarter as the company benefits from events such as the Summer Olympics and Euro Cup.

The stock is now down 13% from this year’s high and is at its lowest point in nearly three months. Since Airbnb still has a long growth path, this presents an attractive buying opportunity.

Let’s take a look at some reasons to buy Airbnb’s stock price dip.

Image source: Airbnb.

Airbnb is increasing its market share

Airbnb competes with hotels and other types of accommodations, but its closest competitors are other home-sharing platforms such as: ExpediaThis is VRBO.

But Airbnb already dominates the home-sharing niche with the leading market share among those platforms, and appears to have strengthened its position in the first quarter. Expedia’s revenue grew 8% in the period, while its B2C segment, which includes VRBO, grew only 3%. Total reservations for all nights increased 4%. Expedia doesn’t disclose VRBO results, but it has noted backlash from VRBO’s platform change as the brand moves under the Expedia umbrella, where users can take advantage of Expedia Rewards.

Competitors have been unable to overcome the powerful network effects that exist on the Airbnb platform, allowing Airbnb to remain in the lead.

The platform gets creative with its icons.

In its summer update, Airbnb introduced one of its most original ideas: icons. The company offers travelers the opportunity to stay in iconic locations around the world and create truly unique experiences, such as a night at the Musée d’Orsay in Paris or staying in a house featured in a hit Pixar film. there is. consolation.

Icons are another way Airbnb differentiates itself from hotels and other home-sharing platforms. These ambitious experiences will enhance and strengthen Airbnb’s brand in the travel space and generate buzz about Airbnb’s unique offerings.

As CEO Brian Chesky said, Airbnb is committed to expanding beyond its core business, so investors should expect more of these new features in the future.

Make smart financial decisions

Airbnb is a growth stock, but after being disciplined by the pandemic, management is running the business much more conservatively than many of its Silicon Valley peers, making prudent financial decisions and controlling spending.

The company continues to return capital to shareholders, buying back $750 million of stock last quarter. With share buybacks totaling $2.5 billion over the past year, Airbnb has reduced its outstanding shares by nearly 3% during that period. 3% may not sound like a lot, but this strategy will become more complex over time, and Airbnb will likely be able to increase its share buybacks as its profits grow.

The company is also benefiting from higher interest rates, as it is expected to generate close to $1 billion in interest income this year, providing a significant boost to its bottom line.

These top growth stocks are executing as businesses and leveraging excellent financials, which will reward investors over the long term.