Why Airbnb shares were down this morning

What happened

Shares of Airbnb (ABNB -6.19%) slipped today as travel stocks reacted to yesterday’s interest rate hike from the Federal Reserve and hawkish comments about ongoing rate hikes as the central bank seeks to tame inflation.

While there was no company-specific news on Airbnb, the interest rate move was enough to drag the stock down today.

As of 10:55 a.m. ET, the stock was down 6.3%, while the Nasdaq was down just over 1%.

So what

As an expensive travel stock, Airbnb has greater interest rate sensitivity than most of the market. Travel, particularly vacation/personal travel in which Airbnb specializes, is one of the most discretionary categories of consumer spending. When the economy is strong, consumers tend to spend more on vacations.

The Federal Reserve is raising interest rates to fight inflation, but Fed Chairman Jerome Powell told the press conference that higher unemployment and even a recession are the potential consequences of a rate hike. Yet the central bank believes the best course of action is to get inflation under control, even if it comes at the cost of hurting the economy.

Travel stocks fell overall today as peers like Expedia and Reserve credits reacted to the news, but Airbnb fell more sharply, likely because the stock is more expensive than its peers and because vacation travel is generally more discretionary than business travel.

Now what

Following its decision to lay off a quarter of its staff at the start of the pandemic and focus on profitability, Airbnb delivered on its promise. In the second quarter, it posted an adjusted EBITDA margin of 34% on revenue growth of 58% to $2.1 billion.

These are stellar numbers, showing that so far the company has not been bothered by fears of a recession. The economy looks solid for now as unemployment remains low and consumers are happy to spend on travel, but Airbnb investors should keep an eye on the macro environment as rising rates could pose a risk to the economy. colocation stock.

Jeremy Bowman holds positions at Airbnb, Inc. The Motley Fool holds positions and recommends Airbnb, Inc. and Booking Holdings. The Motley Fool has a disclosure policy.

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