Airbnb looking at a bleak winter, says KeyBanc: 4 big analyst cuts

Investing.com -- Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: a sell initiation at WK Kellogg, and downgrades at Airbnb, Norfolk Southern , and Bread Financial.

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Airbnb dented on KeyBanc downgrade

Airbnb (NASDAQ:ABNB) shares were down nearly 3% premarket Tuesday after KeyBanc downgraded the company to Sector Weight from Overweight, as reported in real time on InvestingPro.

The analysts are particularly concerned about short-term margin and top-line growth:

Our view is margins have reached a [near-term] peak and revenue growth could decelerate to +11% y/y in 2024E as consensus works as room night [and experiences] (RNE) and [average daily rate] ADR growth moderates.

They added that their forecasts for earnings before interest, taxes, depreciation and amortization (EBITDA) for 2024E and 2025E are now 8% and 5% below the analyst consensus, respectively.

The analysts said they believe the risk to RNE growth "begins in 4Q" in part due to the new restrictions against Airbnb and other short-term rentals in New York City, which they say "could accentuate q/q declines" given New York's popularity as a New Year's Eve destination.

"Net, we believe it is more likely that Airbnb posts decelerating RNE growth into year-end, which makes Street forecasts for 14% annual growth through 2025 too aggressive," say the analysts.

Airbnb is set to report its Q3/23 earnings on Nov 1.

Shares were lately trading at $132.75 in the premarket.

WK Kellogg started at Sell following spinoff

Goldman Sachs initiated coverage on WK Kellogg (NYSE:KLG) with a Sell rating and a price target of $11.00 following the completion of Kellogg Company's (NYSE:K) spinoff of its North American cereal business into the WK Kellogg standalone entity.

WK Kellogg saw a notable decline in its shares on the first day post-spinoff, closing more than 9% lower Monday.

According to Goldman Sachs, the company has potential for margin expansion, but there are challenges ahead:

While we see near-term margin expansion potential on favorable input costs, we believe productivity programs are likely to be back-end weighted in FY26 and partially predicated on a manufacturing network rationalization that is currently impeded by the plant closure moratorium that it entered into with its unions in late 2021; this expires in 2026 when the contract is once again subject to renewal.

Shares closed Monday at $13.35.

Downgrades for Nortfolk Southern, Bread Financial

Norfolk Southern (NYSE:NSC) shares fell more than 2% Monday after BofA Securities downgraded the company to Neutral from Buy and cut its price target to $215.00 from $266.00, noting that service faces challenges while the company's costs are too high.

"NSC experienced a data center outage Friday (Sep 29) evening, which suspended its dispatching, train starts, and terminal operating systems until Sep 30 morning," the bank explained. The company expects to see service impacts on its operations over the next two weeks as it works to mitigate congestion caused by the outage.

"We believe this is an increasing risk to future earnings as a lack of service consistency could lead to share loss and challenged pricing gains," noted BofA. The bank also mentioned it expects negative leverage as well as increased fuel costs to lead to lower margins.

Elsewhere, Goldman Sachs downgraded Bread Financial (NYSE:BFH) to Sell from Neutral with a $32 price target. As a result, shares fell nearly 2% Monday.

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