$ABNB puts or calls? Earnings play.

Submitted by PopperChopper t3_yi85uy in wallstreetbets

I’m buying puts. Currently hold 108p for this Friday.

My thesis is based on:

-online sentiment is garbage. Hosts and guests all complaining about bookings, fees, algorithms

-travel season is slowing down. Pandemic is over. Not getting that boost in bookings from people stuck at home.

-the fees have gotten to a point where hotels are more attractive. I think that’s has been the case for long enough to have the market digest and suffer the consequence. I believe it will be reflected in revs.

-I heard insiders have been selling but I am not familiar enough with the company itself to rationalize exactly why.

-regulation in some markets.

-the niche has been bastardized by hosts looking to make a living on short term hostel style rentals. Abnb was useful for unique venues or renting a place that is otherwise not available through traditional travel avenues. Renting a bullshit converted room for $350+fees for the night is not what suits Abnb.

-even if earnings are decent coming off of summer, I expect forward guidance to sink

-earnings has been rough for all tech

-they trade at a hubris 50-60x P/E ratio

Counter points:

-travel stocks have been doing well.

-market is irrational

-we are still coming off of summer booking numbers this quarter which may be decent

-people love future growth companies like Abnb

What are your thoughts you distinguished regarded individuals?

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Comments

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makeitcount09122018 t1_iuhgqc7 wrote

Your general thesis is correct but I don’t see them going down this quarter. Travel is still up and bookings are fairly high. It will come down but might take another quarter or two. I personally know people who are over leveraged on properties and aren’t feeling any pain (yet)

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gamesexposed t1_iuhhegi wrote

Someone take the crayons away from this man, seems he's grown a wrinkle

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dossier t1_iuhs6rs wrote

The loudest and most frequent posts on the airbnb host subreddit and FB group is that AirBNB is horrible. But maybe they're just the loud minority here. Would be a typical scenario for that

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liquefire81 t1_iuinybz wrote

10% make 90% of the noise, its an unwritten maths rule that i just made up.

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Big69MoneyMoves t1_iuj0zkz wrote

You didn’t include FX.

ABNB has a shit ton of international exposure yet still report earnings in USD. The FX conversion alone will destroy their margins.

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wsbgodly123 t1_iuhf3dl wrote

Buy a straddle. Both puts and calls

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VisualMod t1_iuhetqm wrote

>I agree with you that the market is irrational and that Abnb is overvalued. I think their earnings will be decent this quarter, but forward guidance will sink the stock price.

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OzrielArelius t1_iuidmb1 wrote

I've got 75P for next year. FUCK Airbnb from the bottom of my soul.

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PopperChopper OP t1_iuih82l wrote

Show us on the doll where Abnb touched you

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OzrielArelius t1_iuiiysu wrote

it touched me in my bank account where I was about to have enough saved up for a down payment, just in time for housing prices to skyrocket and now I can't afford the down payment anymore.

everyone and their mother thinks they're a real estate mogul now, buying up properties and listing them on AirBNB. can't wait for the crash

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OneDollar1- t1_iuhnkkq wrote

I agree with the points made for puts… however, I just booked a place this week for later this year and it was hard to find a property. They seem to be doing very well right now. The fees are ridiculous. But still a better setup when going somewhere with a group of friends/family.

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PopperChopper OP t1_iuhotx7 wrote

Harder to book because of high demand or less units?

I wonder what their user growth (or decline) is looking like. I think this will be a huge indicator for price movement.

I agree it’s risky however their earnings estimates are ~1.45 which is significantly higher than the previous 3 quarters so it will be hard to hit. Even a slight miss with bad forwards will be devastating to the price.

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OneDollar1- t1_iuhp3n3 wrote

I see your points but also remember this is usually their best report, which is probably the reason for the higher estimate. I’d also say harder to book for demand. Two times we found a place, and by the time we shared it with the people we are going with to get their thoughts by the time we went back to book, usually only a day later, it was already booked. We finally just grabbed one when we saw another we liked. I’m sure it’s location dependent. I am long term bearish on them but it does seem right now they are doing okay.

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PopperChopper OP t1_iuhpzyb wrote

May the tendie gods be with you then. I think you have a pretty decent shot of being correct. I think the estimates are particularly optimistic though it’s not based on rubbish with travel stocks going up and 3q being their best quarter typically.

Though with the loftier expectations, a fall will be more dramatic so it can play into the put option. Max pain for Friday is 115 and put call ratio is near parity with a leading edge to the bulls. One would think, based on what you are saying, that there would be disparity towards the call side of the option chain.

3

stonxup420 t1_iuhpg9d wrote

im inversing WSB. PUTS

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TheUsualNoWorky t1_iuiv2an wrote

I'd expect a drop.

Pandemic drove a major pop. In most areas demand will regress but supply in all those areas has increased a lot.

In this environment, high PE ratio with no major growth prospect is bad news.

I think too much is priced in.

I had a long term lease contract for one property at 40% less for a renewal than last year. I think it's low and I don't like the operator, but everyone is forecasting a drop. It's been hot as hell and cooling off fast last few months.

Q3 rev will probably look good though

So I'm bearish on Airbnb, only because of their current valuation, not business model.

And the idea that they will do much better when people fly more - well the counter is, those trips are more expensive, so more share of wallet goes to airfare, rental cars/etc. And flight destinations have more competition from hotels and resorts.

Airbnb did extremely well as people drove to getaways within about 3 hours from where they live. Nightly rates went up.

The workcation thing I think is here to stay.

So your "travel stocks doing well" counter point doesn't apply to Airbnb to me. And that's also reflected in Marriot doing well from Jan 21 on and Abnb dropping from there.

Abnbs however, are great options during recessions. People still take vacations, they just drive. Airbnb has a distributed hotel but without the expenses of one, so they have inventory wherever the consumer travels.

I don't like their valuation though.

4

Disaster1992 t1_iuhfvfg wrote

October is usually their best earning report of the year, not to mention the higher adjusted expected eps for the upcoming earning report. I will stay out of this one

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PopperChopper OP t1_iuhg304 wrote

So if they do in fact miss, it could be catastrophic. I think even if they do it expectations, their forward guidance will be what drive them down.

Or I am just a gullible prick.

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Grape_Ape1980 t1_iuhm2s8 wrote

I’m going with calls. I live in japan Airbnb is popular here. There’s been no rise in fees here I think it’s probably just in America because owners are needing to make money back they lost during the pandemic. I think this is the first summer after the pandemic that travel bans were lifted in many countries. Philippines, Thailand, South Korea, Taiwan, Malaysia, Asia has a big market for Airbnb so I don’t see them missing. I’ve got 20 calls @116

3

LoneClap t1_iuhnfjp wrote

The fees are abnb related not owner related. The cleaning fee is a one time fee for the trip for 50% of one night it seems. This is killing the weekend vacation ideas, stay 2 days pay a half a day in cleaning, it's screwing people over and hotels are the same if not better cause you get that continental breakfast.

8

TheUsualNoWorky t1_iuiqu0u wrote

Cleaning fees are owner related. They have nothing to do with the price of a night, but more so with the labor cost and the size/scope of the house which happens to hover around 50% of the cost of a night in many areas.

Labor costs are quite high to clean a home. I know it might not seem like it, but to turnover a house right costs a lot of money.

Usually costs me $300-350 (big house). I don't mark it up. Pay cleaners a living wage. Laundry, mopping, vacuuming takes a long time. If you aren't paying a good chunk for cleaning, I'd be concerned.

Not everyone does the duvets as an example. That's nasty.

And many don't pay their cleaners a fair wage.

So it sucks, but renters can't be trusted to clean the house. Nor completely launder everything.

1

Entire_Bar5773 t1_iujb4xi wrote

Im outright short at 120 for 1000 shares and wrote covered puts at 110. They are in a 2 bill buyback, thats been propping the price up. I think they have to get close to hotel valuations. I did the same trade with amd nvida guessing they go closer to intel valuations and it worked out.

3

LoneClap t1_iuhfen0 wrote

I'm with you on all your points, but i think they won't have a massive dump until the housing market starts selling off more. We only just hit the peak and I think once these rental homes start selling off is when abnb is really going to be hurting. I'm still gonna buy some puts, but I think the next earnings or the following are going to be the real winner.

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PopperChopper OP t1_iuhfiij wrote

That’s actually the one thing I forgot to include - my fear that I’m about 1 quarter too early for this thesis

3

MathematicianKey5605 t1_iuhgi83 wrote

I was just gonna say you might be 1 quarter too early on this. But hey, your puts might print? I dunno

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PopperChopper OP t1_iuhh0jk wrote

So if I fuck up I should double down next quarter?

4

gamesexposed t1_iuhhk9r wrote

This is the regarded mentality that I come here for. Someone's telling you your thesis is probably trash but you're ready to proceed anyways and double down when you already know you're going to lose LMAO

Stay smooth regard, I look forward to your slip n slide

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PopperChopper OP t1_iuhhtmy wrote

To be completely honest with you, the fact that everyone here is a little bit iffy on the play absolutely fuels my confirmation bias

4

gamesexposed t1_iuhi0sw wrote

Believe it or not, there's some well aged brain wrinkles around these parts...

But hey, you do you and godspeed fellow crayon enjoyer

1

PopperChopper OP t1_iuhinf5 wrote

Well the only substantive counterpoint someone has put forward so far is that October is typically their best earnings coming off of the summer month. Which I have already taken into account. It may be enough to maintain or elevate the current market sentiment. However overall I think there are currently more things working against that overall sentiment then for it. Obviously it’s a getting game however I don’t think anyone has provided any points that renders the theory meritless

Edit: EPS estimates also look particularly high this quarter

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CatonHotSand t1_iuijnqv wrote

DId you already take profits or are you holding through earnings?

2

Rezervez t1_iuivyox wrote

Holding $105 puts May sell before earnings but most likely will hold

2

VisualMod t1_iuhetck wrote

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>TL;DR: I'm bearish on ABNB and am buying puts for this Friday.

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chutoro_y_moi t1_iuix34v wrote

I would buy puts and end up losing money, so you should inverse and buy calls.

1