By Senad Karaahmetovic
Shares of Airbnb (NASDAQ:ABNB) are down about 3.5% in pre-open Wednesday after Morgan Stanley analysts cut the rating to Underweight from Equal Weight. The analysts' new price target of $80 per share implies a downside risk of 14% relative to yesterday's closing price.
They decided to downgrade Airbnb stock after the firm's deep dive analysis yielded several concerns, including listings growth, occupancy headwinds, and lower room night demand.
"ABNB's required forward supply has been a key debate since IPO and our new supply and occupancy deep dive speaks to budding growth headwinds," the analysts wrote in a client note.
As a result, they cut estimates "significantly" to reflect these risks, which are not that well understood by the Street. Morgan Stanley now sits between 10% and 20% below Street on EBITDA. They also see the "above average risk" of a bear case playing out for Airbnb, which would push the price toward $60 per share.
"Our model for decelerating supply speaks to how it is increasingly important for ABNB to drive demand growth through higher occupancy and/or more nights available per listing," the analysts added.
Airbnb stock is down 44% year-to-date (YTD).