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Airbnb: "Growth & Profitability At Scale"
This is an extended preview of today's write-up, exclusively for Commonstock readers. To read the remainder of the post, please subscribe to the TSOH Investment Research service.


Airbnb recently reported its Q2 FY22 financial results, with the quarter providing incremental evidence that the global leader in alternative accommodations has emerged from the pandemic in a much stronger position than where it entered. Nights & Experiences (N&E) booked in Q2 were 103.7 million, the largest quarter in the company’s history (+25% YoY and +24% vs Q2 FY19). As shown below, the business has generated 359 million N&E booked over the trailing twelve months (TTM), or ~10% higher than the pre-pandemic peak. It has been a wild ride over the past two and a half years, but these results clearly indicate Airbnb is back to playing offense.

Gross booking value (GBV) in the quarter was $17.0 billion, up 27% YoY (+34% in constant currencies) and up 73% vs Q2 FY19. On the 2019 comparison, the huge discrepancy between N&E growth and GBV growth is reflective of a ~40% increase in average daily rates, or ADR’s (as shown below, Q2 FY22 ADR’s were ~$164, nearly $50 higher than in Q2 FY19).

As I’ve written previously, higher ADR’s are reflective of price appreciation (hosts listing their properties at higher rates), geographic mix shift (outsized growth in North America / the U.S.), and property / accommodations mix shift (long-term stays, whole home versus a single room, etc.). On the Q2 call, management provided some color on the contribution from each of these factors: “About two-thirds of that increase (the 40% lift vs Q2 FY19) has been price appreciation, and about one-third has been mix. And so we do anticipate that over time, as more people return to travel to urban and more cross border, that ADR’s may moderate. But yes, two-thirds has been price appreciation. So it's been stickier than we anticipated six months ago.”

What remains to be seen is whether that stickiness will hold if we experience a more difficult macro environment (one where travel isn’t bucking the trend). I have no reason to believe a reversal back to ~$115 ADR’s is in the cards, but I continue to harbor some questions about the sustainability of the strength exhibited in the past six quarters. (By the way, lower ADR’s wouldn’t necessarily be a negative outcome - for example, if it was driven by geographic mix growth / a resurgence in N&E bookings growth in APAC.)

Supply & Demand

In my ABNB deep dive (Airbnb: “Belonging Anywhere”), I spoke about individual hosts and unique supply as a key point of differentiation for Airbnb’s platform (and a long-term competitive advantage for the business):

As I think about the long-term growth and sustainability of Airbnb’s business, individual host growth is one of my main KPI’s. A large and growing number of individual hosts is what truly makes the platform unique. Notably, the GBV per average listing in 2019 was ~$7,000, which suggests that this is a supplemental source of income for many of ABNB’s individual hosts. In my mind, that conclusion offers some protection to Airbnb’s unique supply (as noted earlier, ~70% of listings are only available on Airbnb). Said differently, for the average individual Airbnb host, as long as they’re seeing activity on Airbnb, it may not be worth the headache to list their homes elsewhere. If that holds, I think it will be a meaningful long-term competitive advantage for Airbnb. (“Individual hosts are the core of our host community… OTA’s are primarily focused on professional hosts.”)

Since that was published last September, Airbnb has continued to make meaningful product enhancements that highlight its unrivaled host supply; the two most notable examples are “I’m Flexible” and Airbnb Categories. As CEO Brian Chesky discussed on the Q2 call, both of these features enable Airbnb to highlight what makes it unique from competing platforms like Vrbo:

“For decades, travel search has worked the same way: there's a search box and you are asked to enter a location… Airbnb is in 100,000 locations all over the world; people can't type 100,000 destinations into a search box. And so, people miss millions of unique Airbnb’s they would have never known to search for… We think that categories can allow us to point demand to where we have supply. This, I think, is one of our really big opportunities… Our business model works uniquely for this because we have a lot of unique inventory.”

Features like Categories and “I’m Flexible” are directly translating to success for new supply (most importantly for individuals with a single listing / non-professional hosts), with management noting on the call that the majority of hosts secure a guest booking within their first week on Airbnb (“we’re distributing guest discovery across more destinations and dates”).

That said, as a frequent Airbnb user, I’ve found that some of these product changes have been detrimental to the guest user experience - and I think that outcome is directly related to the company’s goals on the other side of the equation (helping new listings see early success in order to continue expanding the number of hosts and to continue growing unique supply). One notable example is that there’s no way on Airbnb to sort listings by the quality of the listing (guest rating), the number of reviews (experienced hosts), etc. This would clearly be a useful tool for guests – but it could also be an impediment to the success of new listings / unestablished hosts, which is critical to attracting and retaining unique (new) supply. At the end of the day, I’d bet the company has concluded that this is a product design decision (trade-off) that is worth making to support its long-term business goals.

Long-Term Stays

A quick update on this topic, which I spoke about in detail last quarter. (“I think it’s an open question whether long-term stays will continue to drive the majority of ABNB’s incremental bookings growth in the years ahead, as they did from 2019 – 2021.”) This continues to be a significant source of volume for Airbnb, and a use case where their consumer value proposition / ability to differentiate from traditional travel accommodations is most apparent.

(End Of Preview)

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Really enjoyed reading this. $ABNB is emerging from the pandemic stronger, (a sign of antifragility). The new features and filters added to the search definitely enhance the discovery experience.

What thoughts on Chesky's leadership style?
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What I like most about $RKLB -Question by @nathanworden
First thing is first. I love the CEO, he is a mixture of my two other favorite CEOs which is Alex Karp and Elon Musk, but what stands out about him is that he is willing to say when he is wrong and he is willing to communicate with everyone on twitter. A big part of my trust comes with Peter Beck as the CEO.

Next is them not being the 2nd place to SpaceX as launches go but actually that Peter Beck isnt just trying to make a launch company, hes making a space company that has (Quote from link below) "As it turns out, total revenues at Rocket Lab surged 124% year over year to $40.7 million in Q1. And the reason for that is that Rocket Lab's new "space systems" business, which builds spacecraft for its customers, absolutely exploded in size, growing 1,873% year over year to account for 84% of company revenues at $34.2 million.

As CEO Peter Beck explained, Rocket Lab has implemented a "rapid succession of space systems acquisitions," employing its IPO cash to transform itself into an "end-to-end space company delivering complete spacecraft design and manufacturing, satellite components, flight software, and launch services." As a result, the company won a $143 million contract in Q1 to build 17 spacecraft buses for Canadian space company MDA and its client Globalstar.
This was Rocket Lab's biggest-ever contract win -- and it never would have happened if Rocket Lab had confined its business to just building rockets. (https://www.fool.com/investing/2022/05/18/rocket-labs-biggest-business-isnt-rockets-at-all/)

Lastly, Peter Becks willingness to adapt and change and as their mission statement says "WE OPEN ACCESS TO SPACE TO IMPROVE LIFE ON EARTH" is a statement I can agree and support and invest in.
Will be interesting to see them report earnings, they're actually cashflow positive...
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My trades for $RKLB on Commonstock
Going into this earnings tomorrow. I'm excited. I'll keep buying the dip, I love this company it has become my favorite company and currently my top holding. $RKLB
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Wow that’s a good amount of transactions over the last year! A lot more buys lately than sells. What do you like most about RocketLab? $RKLB
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Jared Watson's avatar
$18.5m follower assets
First Blush: $SLDP Q2 2022 Earnings
Business Highlights:
  • Cell development remains on track, with initial 20 Ah silicon anode cells (“Silicon EV cells”) expected to be shipped during the third quarter to [Ford and BMW].
  • EV cell pilot line installation completed in June, with optimization activities ongoing. Production of EV-scale cells for internal testing still expected during the third quarter.
  • Construction of electrolyte production facility progressing, with initial production expected in the first quarter of 2023.
  • First half 2022 revenue reaches $4.8 million, nearing the high end of full-year revenue guidance.
  • Investments in operations, production equipment and technology development continue on accelerated timeline.
Additional Management Commentary:
  • Supply chain challenges opening up the new electrolyte facility are not expected to impact partner delivery milestones, as a result of existing electrolyte production capacity being sufficient to meet near-term product requirements.
  • "Longer term we expect the [pilot] EV cell line to provide us the capability to complete B sample validations phases for both of our automotive partners, which is a significant milestone in terms of qualifying EV cells for vehicle integration." - Doug Campbell, CEO
  • "We ended the quarter with total liquidity just over $534 million consisting of cash, marketable securities and long-term investments. We are executing right in line with our accelerated operational and development plans, keeping us in a position where we believe we have the resources we need to achieve our long term goals." - Kevin Paprzycki, CFO
My Take:
Q2 was a nearly perfect quarter for Solid Power, with management continuing to under-promise and over-deliver on partner delivery and development milestones. This relentless execution led to the company already meeting the high end of yearly revenue guidance only halfway through the year, which reflects accelerated partner deliveries and implementation for their government contract(s).
I think it's both insightful and necessary to compare Solid Power's progress to their only public competitor in the EV solid-state battery space, QuantumScape. $QS has consistently missed product milestone dates, recently had their Chief Manufacturing Officer resign, and admits that they will need to dilute or issue debt to make it to production, if they actually do end up making it there.
Meanwhile, Solid Power has done nothing but meet or exceed milestone dates, burn only $17.3 million of their $534 million cash in Q2 (showing the resilience of their asset-light business model), and remain on track to get to production in 2024 despite the numerous macro headwinds and supply chain challenges.
I'm loving the opportunity to scoop up $SLDP shares at the current valuation of only $1.3 billion MC, which is criminally low for a bleeding-edge disruptor in a nascent yet massive (TAM estimated at $300+ billion in 2035) market opportunity. With a litany of short and long-term catalysts on the horizon and a 10+ year history of execution, Solid Power is one of my highest conviction picks.
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Wow I’m shocked they’re profitable being that small. Surprised I haven’t heard of it. Gonna have to check out the battery tech.
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It Cuts Both Ways
We hear a lot about operating leverage these days. We believe there is significant operating leverage and value stored up in $NATI 's historically high backlog which we discuss in our latest Substack.

Good point right here:

" If a company increases its price for a widget by 8%, the revenue number goes up even if it ships the same number of widgets as last year. Yes, companies are experiencing higher costs for inputs like raw materials, labor, and freight. However, many input costs are relatively fixed meaning they don’t go up as much or remain the same -think costs like depreciation on equipment and insurance on the property. Higher revenue run over these relatively fixed costs results in an upward lift for profit margins."
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More than 87% of the $SPY firms have reported actual results for Q2 2022, and these firms’ actual EPS is 75% higher than expected (lower than the 5-year average of 77%).

The chart shows the sectors that reported earnings above estimates (in green).
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Jennifer's avatar
$22.7m follower assets
Buyer Beware
There's a reason I warn about the risks involved with junior miners. From changing political winds to disappointing drill results, there's a lot that can go wrong. I do my best to avoid companies where management has a questionable track record - but even those more experienced in MinTwit than I am can still be duped.

If you're on Twitter please check out my thread there as well.

Re-upping this post because I'm seeing some Twitter activity that suggests some people need to be reminded:

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Conor Mac's avatar
$341.8m follower assets
Teens, Social Media and Technology 2022
Pew Research put out some great data on teen app usage yesterday, the TLDR can be boiled down to:

• YouTube is surprisingly the stand-out star, with 95% of teens using it and 19% reportedly admitting to using it "almost constantly".

• TikTok is the most popular social platform amongst teens, with 67% using it vs 62% using Instagram, and 59% Snapchat.

• Facebook is a dodo for teens. Whilst 71% of teens reported to using it in 2014, that figure has fallen to just 32% today.

About 35% of teens report using at least one of the above platforms "almost constantly".

• 19% of people said this about YouTube
• 16% of them said it about TikTok vs 10% for IG
• Only 2% of them suggested they use Facebook almost constantly

-> 46% of teens admit to using the internet "almost constantly", up from 24%.

Today, nearly all teens (US) have access to a smartphone (95%), up from 73% in 2014-15.

This still holds true across all household income segments, where smartphones appear to be valued more greatly than desktops, laptops and gaming consoles.

The full report can be found here
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Interesting statistics. At least IG keeps it up for $META . Is there a similar study on a global scale?
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Leandro's avatar
$133.3m follower assets
4 steps to look for worthwhile investments
I prepared the following visual with the 4 steps I take to find worthwhile investments. What would you change/add?
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Would add differentiation between competitors, although that could fit in #2. Great graphic 🔥
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hypescaleflow's avatar
$25m follower assets
Problem with CPI and the market’s reaction
Here’s a great breakdown of what todays CPI report actually means, and how the market reaction is misleading.

From the YouTuber: ticker symbol: You

Rick Gurner's avatar
$9.1m follower assets
Inflation will stay between 8% and 10% for the remainder of the year
Will inflation remain high?
Inflation will stay between 8% and 10% for the remainder of the year
15 VotesPoll ends on: 08/11/22
Yes unless food,housing, and wages cool which I see 2 out of the 3 happening. Best case 7-7.5 by December unfortunately. All depends on what the Fed does going forward.
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Fed in a good spot?
The Fed seems to be in an okay spot now perhaps..

If inflation continues to run hot and job market supports it, they can keep raising.

If unemployment rises and growth continues to decelerate, they have room now to head back towards 0 if needed.

The market has handled all of the bad news with grace and maybe it’s up on hoping, but, companies are still out there putting up growth. Earnings growth rates continue to tick up for Q2 the more companies that report.

I know we still have headwinds but, can’t help but start to see any pullback in the broad market from here as a dip buying opportunity. $SPY $QQQ
Unity Software (update)
$APP makes an offer to buy $U (Unity software) in a $17.54B all-stock deal or $58.85/share, in order to derail Unity's announced plan to acquire AppLovin's smaller competitor ironSource for $4.4B

Unity will own 55% of the combined company's outstanding shares, representing about 49% of the voting rights.

Unity's software has been used to build some of the most-played games such as "Call of Duty: Mobile," and "Pokemon Go", while AppLovin provides helps developers to grow and monetize their apps.

Wedbush Securities: "The proposed price for Unity appears well below its intrinsic value, and we would expect Unity to reject it for that reason. We think interference with the ironSource acquisition is problematic and will cause Unity’s board to tread very carefully before agreeing to a sale outright."

$U is 13.3% of your portfolios
Fintwit's avatar
$127.3m follower assets
July inflation
The Consumer Price Index rose 8.5% in July, down from 9.1% in June.
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Conor's avatar
$21.1m follower assets
Unity Software $U AppLovin Deal
Unity has been in investors' crosshairs as of late for MANY reasons. All of them are extremely credible and Unity will have to answer these concerns including if their data issue has been fixed or not. However, in light of the AppLovin deal for $U this makes it an interesting time to buy shares or add to a position.

Obviously, AppLovin saw something with the IronSource deal Unity made that would put them at a huge disadvantage. To me, this deal is AppLovin making a desperate play to stop Unity from buying IronSource. If AppLovin, one of Unity's competitors, sees this as a threat then it might be an okay acquisition for Unity after all.

Two Positives

  • Unity gets bought by AppLovin you get a little bit of a premium to where the stock is currently trading, however, not as much as you would think with the current movement in $U shares today
  • Unity doesn't get bought but with IronSource poses a very strong threat to the competition

Disclaimer due your own due diligence. I am not suggesting you buy shares based on this article. Unity is a very risky stock. Please do your own research and make your own decisions.

The fact that APP went to U and said "We propose you buy us and U shareholders own 55% of the combined company" comes off to me as really desperate. APP is asking to be bailed out. You nailed it. They clearly are afraid of U & IS as a combined company.
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Steve Matt's avatar
$19.1m follower assets
Does Match ($MTCH) have an industry problem or a Match problem?
Tim Beyers asked that question on a recent Motley Fool Money episode when discussing Match's poor Q2 earnings. With Bumble ($BMBL) reporting this afternoon, we'll get some insight into if Match has unforced errors here or if the app dating industry as a whole has entered a new, slower growing stage.
Does Match have an industry problem or a Match problem?
54%Industry Problem
45%Match Problem
11 VotesPoll ended on: 08/11/22
Personally, the idea that if they’re successful, their customers no longer need them, turns me off immediately. I want sticky customer acquisition; they seem to be the exact opposite.

With this many people in the world, I’m sure their business will do fine. Just not investment worthy IMO.
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Inflation Nation
Good morning CommonStock! Stock futures have recovered some losses ahead of the CPI report at 0830…

This is the main event of the week and the one we have been anticipating for days. The CPI is expected to print at 8.7% year-over-year, a decline from the 9.1% seen last month. The core CPI, which excludes food and energy, is expected to come in at 6.1% YoY, which would actually be an increase over the 5.9% of one month ago.

Friendly reminder that for all their (numerous) faults, economists usually get the the CPI and especially core CPI figures pretty right. The last two years there have been just six instances where their estimates missed by 0.3 percentage points or more for the core CPI, most recently in March on the heels of the Russian invasion of Ukraine. When it does miss by that much it is often due to external shocks of some sort. There weren’t any of these in July…

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