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Airbnb (ABNB +15%) springboards to nine-month highs today, breaking out of its lengthy sideways trend following sizeable top and bottom-line beats in Q4. ABNB's impressive performance in the quarter mirrors what we saw from Expedia Group (EXPE) last week, which benefited considerably from a better-than-expected travel demand environment.

While ABNB, known for its alternative accommodations platform, projected Q1 revenue below consensus, a significant chunk of its growth was sliced by FX headwinds, making the mild guidance more palatable. Meanwhile, ABNB expects bookings growth to remain relatively stable compared to the year-ago period in Q1, keeping a tight grip on the upward momentum it has enjoyed throughout Q4.

• Nights and Experiences Booked (bookings) grew 12% yr/yr in Q4, a 4 pt acceleration from Q3, consistent with ABNB's remarks in November that it was observing strong demand trends in Q4 across all markets and lead times. Speaking of lead times, ABNB dealt with this headwind last year as travelers hesitated to immediately toss high dollar amounts on trips. However, CFO Ellie Mertz commented that the shrinking lead times proved temporary, supporting strong bookings growth in Q4.
• Following back-to-back quarters of missing earnings estimates, ABNB reversed course in Q4, posting a double-digit beat. Pressuring earnings lately has been a combination of soft bookings growth and overseas expansion. As bookings accelerate, profitability is being largely pressured by ABNB's plans to spend $200-250 mln on underpenetrated overseas markets in 2025. However, despite its investments, ABNB is still targeting adjusted EBITDA margins of at least 34.5% in FY25, a reasonable 150 bp decline yr/yr.
• Another investment area for ABNB is its app. CEO Brian Chesky mentioned during the call that he wants the app to resemble Amazon in that it is the sole destination for consumers' traveling and living needs. Essentially, ABNB wants to move beyond its core, where its platform is used only to discover a place to stay. Mr. Chesky noted that, like Amazon, it started with a core offering and moved adjacent to it. For ABNBN, this would involve other experiences and services that can make a traveler's stay more special. From there, ABNB plans to branch out.
• In the near term, ABNB expects revs to grow +4-6% yr/yr in Q1, representing $2.23-2.27 bln. If it were not for FX headwinds and calendar factors, ABNB estimates Q1 sales growth of +10-12%. Bookings are anticipated to be relatively stable compared to 1Q24, translating to around 9.5% growth yr/yr.

After a tumultuous 2024, the year ahead is shaping up to be a comeback year for ABNB. Its overseas expansion plans will fortify its global presence, providing a tailwind to its global growth rates over the long run. Meanwhile, its vision surrounding its app is ambitious, potentially paving the way for a significant uptick in usage. Consumers in the U.S. and across many of ABNB's core markets have firmly demonstrated their unwillingness to give up traveling despite uncertain macroeconomic conditions. ABNB is pouncing on this opportunity, cementing its base for when economic conditions rebound more meaningfully.