Airbnb's Growth Stalls: Why the Bear Case is Stronger Than Ever

As Airbnb (ABNB) confronts slowing growth and intensifying competition, investors are left questioning whether the company's valuation is out of step with reality. With Q1 2025 results underscoring a deceleration in nights booked growth and margin pressures, the bear case for Airbnb gains momentum. Meanwhile, the company's delayed entry into loyalty programs and lackluster innovation contrast sharply with rivals like Vrbo and Expedia, which are leveraging these tools to retain customers and boost margins. Below, we dissect the risks and why a short position ahead of future earnings could be warranted.

The Bear Case: Growth at a Crossroads

Airbnb's Q1 2025 earnings revealed a mixed picture. While revenue rose 6% year-over-year to $2.3 billion, adjusted EBITDA margins fell to 18%, down from 20% in Q1 2024, signaling operational inefficiencies. Nights booked grew just 8%—the slowest pace since the pandemic—a stark contrast to pre-pandemic growth rates exceeding 20%. The company's take rate also dipped to 9.3%, pressured by foreign exchange impacts and Easter timing shifts.

The margin contraction is particularly alarming. Operating income plummeted to $38 million (2% margin), down from $105 million (5% margin) in Q1 2024, as R&D and marketing expenses surged. This reflects a costly pivot toward new initiatives like “Airbnb Services” (e.g., chefs, massages) and AI-driven customer support, which have yet to prove their value.

Competitive Pressures: The Loyalty Gap

While Airbnb experiments with niche services, rivals are solidifying customer retention through robust loyalty programs. Vrbo's One Key program, for instance, offers tiered rewards (e.g., 2% cashback on Expedia/Hotels.com bookings for Silver+ members), while Expedia has integrated Quill Rewards to boost cross-sector engagement. In contrast, Airbnb's lack of a formal loyalty program leaves it vulnerable to customer attrition.

Analysts estimate that 30% of Airbnb's revenue comes from repeat customers, a fraction of the 60%+ repeat rates seen on loyalty-driven platforms like Expedia. This gap suggests Airbnb risks losing high-value travelers to competitors offering tangible rewards for loyalty.

Bulls' Counterarguments: Cash Flow and Expansion

Bulls point to Airbnb's $1.8 billion in free cash flow (FCF) and its global expansion efforts as positives. The company's push into markets like China and its relaunched Experiences platform are seen as growth catalysts. Additionally, AI tools like Instagram Trip Matching aim to enhance user acquisition.

However, these arguments have cracks. The Experiences relaunch has underwhelmed investors, with no material revenue contributions yet. Meanwhile, FCF is inflated by one-time gains, such as share repurchases ($807 million in Q1), which may not be sustainable.

Valuation Risks and Technical Weaknesses

Airbnb's valuation remains a concern. At a price-to-sales (P/S) ratio of 2.5x—far above Expedia's 0.9x—the stock is pricing in growth that the Q1 results do not support.

Technically, the stock has underperformed peers since late 2024, with a 20% decline from its January 2025 high. Analysts warn that macroeconomic headwinds, such as rising interest rates and cautious consumer spending, could further pressure demand for discretionary travel.

Investment Recommendation: Short Ahead of Earnings

The bear case is compelling: slowing growth, margin erosion, and strategic missteps in loyalty programs suggest Airbnb's valuation is inflated. We recommend a short position in ABNB ahead of its February 2026 earnings (or subsequent reports, depending on the exact timeline), with a stop-loss at $120 (current price: ~$105 as of June 2025). Key risks to watch include:
- Margin recovery: Can Airbnb stabilize EBITDA margins above 20%?
- Competitor moves: Will Vrbo's One Key program or Expedia's Quill partnership accelerate customer flight?
- AI adoption: Will new tools like Trip Matching drive meaningful growth or remain niche?

Conclusion

Airbnb's inability to sustain high growth, coupled with its delayed loyalty strategy and costly experiments, paints a cautionary picture. While bulls cling to cash flow and international expansion, the data suggests the company is struggling to compete in a maturing market. For investors, betting against ABNB now offers a high-risk, high-reward opportunity as the company faces mounting headwinds.

Final recommendation: Short ABNB with a target of $90, hedged against macro volatility.