Full video: https://youtu.be/ryUFPD0taLY

For weeks hundreds of Airbnb hosts have been complaining about a sudden drop in bookings. This started with a viral tweet by "Texas Runner DFW" in October, in which a superhost from Palm Springs said their "occupancy literally hit 0% the last two months". After that, many others have come forward and said the same thing, ending up with this viral video by Shelby Church. I took this personally, and asked 17 Airbnb hosts in places like Miami, Greece, Spain, Paris, Rome, etc (some haters will say I was vacationing, but I was actually doing research). Anyway, I discovered some pretty interesting things.

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The first thing was that hosts in Europe didn't seem to be having the same issues as the ones complaining in the US. The ones in Miami did have an occupancy hit, but in line with summer, which is off-season due to hurricanes. Overall, the Airbnbust cases came from second tier cities in the US, many of which enjoyed record bookings in 2021 and first half of 2022. We know Airbnb's has done around 100M nights and experiences for 3 quarters in a row, so where did all those bookings go?

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I believe 2 things happened around summer that sucked all the excess demand from the vacation rental market in the US. Leaving novice hosts in the dust.

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In 2021, everyone in the US did local vacations, as COVID was still rampant. So many cabins in the mountains, and trips to New York. It wasn't until the beginning of 2022 that US consumers started traveling abroad. And even then it sucked! I missed some flights to Colombia and Spain in Feb. The COVID requirements would change every week. But look at what happened in Spring:

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March 14: France removes vaccine pass

April 9th: Czech Republic removes all COVID travel restrictions

April 13th: Greece follows suit, then

April 15th Estonia

April 18th: Cyprus

April 29th: Bulgaria

May 1st: Lithuania and Croatia

May 16th: Austria

May 23rd: Belgium

June 1st: Italy and Germany

June 6th: Spain

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You get the point. All of Europe reopened in the span of 3-4 months. All that pent-up demand for EuroTrips from the US market came all at once. Which dried most of the excess demand for local vacations. Specially for cities not named New York, Miami, Vegas, etc. To illustrate this better I want you to visualize the change between Q2 and Q3 for $ABNB revenue:

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Notice how the share of bookings in the US dropped from 48% to 41%, as travel moved international for the first time in 2 years. Now you might be thinking "yeah, it dropped percentage wise, but there's still $1.2B in booking fees, surely there was still plenty of demand in the US", which leads me to the second event that solidified the Airbnbust.

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According to Jamie Lane, VP of Research at AirDNA, short-term rentals are in demand, with a YoY rise of 15.8% in the number of future nights booked as of October 2022. But data shows that while the number of bookings has risen, there has also been a sharp rise in supply of available short-term rental listings, up 23.3% in Oct 2022 vs Oct 2021.

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All of this to say, that professional property managers entered the market in Q1 and Q2, outcompeting novice hosts for the excess demand left in the US. You can visualize this better in this graph, which illustrates the bump in Q2 in Palm Springs, California. Which is where all these Airbnbust reports started coming from:

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Okay so this sucks for US hosts, but what does this all mean for $ABNB shareholders? Which is what we are all here for. An Airbnb shareholder will not be affected negatively by this. Airbnb will benefit from demand for travel regardless of where that demand is geographically moving to. And this is one of the advantages of $ABNB over hotel chains. The pockets of demand for travel change very rapidly, and a hotel chain would need to build physical infrastructure first, whereas Airbnb can just direct traffic to hosts in those areas and get their fees regardless. And this is exactly what happened in Bali, Indonesia, before it became the hot spot it is right now. I believe the same event is happening once again, but on a bigger macroscale.

With Elon's latest erratic behavior, one has to wonder if he's even fit to be Tesla's CEO at this point. Make no mistake, I'm no Elon hater, $TSLA has been a significant part of my net worth since 2017. I think the time has come for the Board of Directors to remove Elon and find a suitable replacement for the CEO position. It's time to focus on brand damage mitigation, so he can't stay with Tesla in another position.

This pains me greatly because Elon Musk is the best operator CEO in the world. But he has let his ego get the best of him, so he no longer cares about the sustainable energy mission. All he cares about at this point is pissing off his client base, and pissing off his investor base. Freedom of speech, while important, was never a reason why thousands of investors bought $TSLA stock, or their EVs.

I think Larry Ellison's departure from the board has caused the current situation. With nobody to correct his bad behavior, Elon is now surrounded by Yes-Men, and has nobody to check him when he wants to do something stupid. There's no checks and balances in Tesla's board, and their refusal to approve a buyback, is the ultimate proof of that. The only reason a buyback hasn't happened, is because Elon has not given the signal to the board that he's done selling shares. It should be the other way around, the board should be the one checking Elon.

In conclusion, $TSLA will keep trading as a popularity contest on Elon Musk, until the board of directors decides to either approve the buyback or fire Elon Musk. And while Tesla fundamentals remain better than ever, I think investors might need to start cleaning up the board before they can have any real chance to touch Elon.

$TSLA is trading at it's biggest disconnect ever between stock price and EPS trend. Bigger delta than "Funding Secured" and "Covid Lockdown" sagas. Tesla stock now trades completely decoupled from earnings. This is not common in any sector, and contrary to popular belief, it is not macro driven at all. We are witnessing a very rare event, that will be studied in micro-economics classes for years to come.

$ABNB now trading at a 38 P/E and a Price to Free-Cash-Flow of 19. This comes after a double beat, and revenue growth of 29% (36% ex FX) and EPS growth of 46% (61% ex FX). Stock is down 10% today, and the reasoning going around is "weak Q4 guidance". I have a feeling most of the talking heads don't understand $ABNB is an extremely seasonal business. Q3 is always stronger than Q4 due to summer travel season, hence QoQ comparisons are not only misguided but highly amateurish. Investors who truly understand Airbnb's business, use YoY comparisons, or even better, TTM comparisons.

I added some points of comparison, in terms of multiples, to some really well run businesses. Not a knock to any of those, just a highlight of $ABNB 's absurdity. I have a feeling these prices will not age well.

Airbnb stock underperforming big going into earnings on Tuesday. Both today and yesterday $ABNB underperformed $QQQ significantly, I wonder if someone has insider information, or people just taking profits?

They will do $1.16B+ in net profits for Q3, only crazy people would sell into that kind of print. If you adjust for IPO costs (one time), the EPS trend for Airbnb is clear as water. Finally a lot of investors are missing the fact that Airbnb can join the S&P 500 after Q3 results, since they clear the market cap, volume, and profitability requirements.

Fundamentals have never been this strong for $ABNB.

We spent $378B (or 8% of the budget) on net interest last year, when interest rates were nearly zero. What happens this year and next year when FED pushes rates to 4.5%? They will bankrupt the treasury department and US government in the process.

There’s only so much you can push rates when you have $31T of national debt on a semi variable interest rate. At some point Biden fires Jerome Powell like Trump wanted to do in Dec 2018.

$SPY $QQQ $DIA

After listening to $TSLA earnings call and going through the shareholder letter, I feel confident enough to estimate Q4 results. Main assumptions are slight margin improvement (Texas & Berlin ramps) and 450k deliveries using Zach's comments about Q4 volume. $TSLA trades at 64 P/E right now, after Q4 that would drop to 53 P/E (lower than Chipotle $CMG and half Amazon's $AMZN). The P/E will keep compressing until they execute the $10B buyback program next year.

After $TSLA deliveries missed for Q3, the delta between the company's earnings and the stock price has never been this big. If we do a graph of stock price vs trailing twelve month earnings per share, we see a huge divergence (as noted by the lowest P/E ever after Q3), and not only that but it's getting bigger.

So how could this be possible? Well, mathematically speaking it's not possible, at least not in perpetuity. In a large enough time frame these two trends cannot both continue at the same time, it's literally impossible, because at some point the company in question will just do a buyout using net cashflow, go private, and give out a 50%+ dividend to the remaining accredited shareholders. Then keep growing in private.

The reality is that one of these two trends will revert, either profit growth rate reverses (currently at 300%), or stock price bounces disgustingly. Obviously Wall Street doesn't believe the profits will keep growing at this massive rate, spoiler alert, they are WRONG. $TSLA will do $9 EPS next year (check out my yearly projections for details), which would put it at P/E of 23. That'd be same P/E as $AAPL for 10 times the growth, or one fifth $AMZN's P/E for 5 times the growth, it just simply wouldn't be allowed (leveraged or cashflow buyout would be on the table).

I'm obviously not saying the stock has bottomed, the market can remain irrational longer than you can stay solvent. But what I am saying is, there has never been a bigger disconnect between profits and stock price for $TSLA, and long term investors can exploit this market inefficiency.

(PS I'm using analyst's post delivery number earnings estimates for Q3)

So $TSLA just released their Q3 delivery numbers, and they came way bellow analysts expectations. The street was expecting 360k deliveries and $TSLA delivered around 343K for the quarter. This is still a new record, but the implications for Q3 earnings are pretty big, both in margins and GAAP profit.

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Before, I was expecting 357K deliveries, and margins of 30%, which would have meant a net profit of around $3.98B for Q3. I'm revising margins down to 26% because of the big disparity between production and deliveries, causing an increase in inventories. I posted my new estimates bellow, but we will see net profit come at around $3.0B.

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So how can a change of 14K in deliveries change net profits by 1 billion? Well, that's $825M of revenue that will now come in Q4, but we accrued the costs of making the product already. I expect a lot of people to panic and sell their shares tomorrow, both institutions and retail. But a lot of institutions already knew, and this explains the massive drop last Friday, so part of it might be already baked in.

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The question is "why such a big miss?" Simply put, China's economy sucks right now. So much so that Tesla had to ship around 1 week of production that would have been delivered in China to Australia and Japan instead. This means that going forward Tesla might need to start dropping prices, and the days of $55K ASPs might be over.

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I'm not too worried about this, because as 3rd generation Gigafactories in Texas and Berlin ramp up, there's plenty of build efficiencies that will make up for the decrease in selling prices (structural battery packs, one piece body casting, etc). Going forward, watch out for price cuts in Q4, if there's none, that's extremely bullish for $TSLA stock. Long term thesis remains unchanged.

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