Red alert as Airbnb stock price forms a death cross, insiders dump

Airbnb (NASDAQ: ABNB) stock price has come under intense pressure in the past few months as concerns about the company’s growth continue. The shares have retreated to about 24% below the highest point this year. 

Airbnb stock has risen by 8.5% in the past nine months, underperforming other comparable companies like Marriott, Booking Holdings, Hilton, and TripAdvisor.

Insiders are selling shares

Airbnb’s business has done well this year as the global economy continues to reopen. This strength is evidenced by the company’s recent results, which revealed that its revenue grew by 17.7% in the third quarter to $3.4 billion. 

Airbnb has also become a highly profitable company. Its net income jumped to $4.4 billion in the third quarter, helped by a one-time income tax allowance of $2.8 billion. Its free cash flow rose to a record high of $4.2 billion.

The company is also benefiting from its international markets. Key countries like Germany, Brazil, and Korea are seeing robust growth. Other countries like China and India are also doing modestly well.

Still, Airbnb faces numerous challenges going ahead. First, the company is facing numerous competition from other companies in the sector. The biggest competitor is VRBO, which is owned by Expedia.

Listing companies like Expedia, Priceline, Booking, and TripAdvisor are also listing vacation rentals in their platforms. Further, hotel companies like Hilton and Marriott have launched their extended stay solutions.

Airbnb has also come under scrutiny because of its substantial additional costs that it charges its customers. As a result, many people have started finding hotels being cheaper than its offerings. In the past earnings release, Brian Chesky, the CEO said:

“In mid-September, we shared progress we’ve made to help lower cleaning fees, reduce prices and improved search and reliability.”

Still, Airbnb has a strong market share in an industry that it developed. This makes its fundamentals quite strong.

A key concern among investors is that Airbnb insiders have been dumping the stock for a while. According to Barchart, insiders have sold over 1 million shares in the past 3 months. In the past 12 months, they have sold over 10 million shares worth over $1 billion. These insiders include Brian Chesky, Dave Stephenson, and Aristotle Balogh.

In most cases, insiders dumping stock is one of the top red flag to consider when investing in a company since they have a clear picture of what is happening. Also, no insider has bought the stock recently.

Still, insider sales are not always a red flag since they sell for numerous reasons, including portfolio diversification. In Airbnb’s case, insiders still holds about 30% of the total float, which is a higher number than other tech companies. 

Airbnb stock price forecast

ABNB chart by TradingView

Turning to the daily chart, we see that the ABNB share price is not doing well. It formed a double-top pattern at $150. In price action analysis, this pattern tends to be the most accurate bearish signs. It has now moved below and retested the neckline level at $123.72, the lowest point on August 18th.

The stock is also about to form a death cross pattern, which forms when the 50-day and 200-day Exponential Moving Averages (EMA) crossover. Therefore, the outlook for the shares is bearish, with the next point to watch being at $100.

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