1 Jim Cramer Stock I’d Sell Today

Stock analyst Jim Cramer has been suggesting which stocks to buy and sell for decades. While he’s made some great calls, Cramer doesn’t get all of them right, including one of his recent stock picks.

During a recent lightning round, Cramer expressed bullishness for Airbnb (NASDAQ:ABNB). On the surface, the call doesn’t look so bad. Airbnb is up by about 2% year-to-date and has decent revenue growth. However, the company faces some headwinds that can be significant in the long run. With so many stocks available, investors may want to steer clear of Airbnb and stick with more reliable picks. Here’s why Airbnb may be in trouble.

Public Pressure Is Building

Airbnb has faced a lot of heat for increasing housing prices. Many investors view Airbnb as a viable place to list rental properties and get short-term tenants. These tenants require a lot more work than long-term tenants, but you also don’t have to worry as much about squatters and property damage.

However, this demand from investors has resulted in Airbnb investors gobbling up the supply of single-family housing. Some cities are starting to lose patience, with protests breaking out in major cities. Some cities have passed laws that temporarily ban new short-term rentals in direct response to the Airbnb problem.

Barcelona ordered Airbnb to axe more than 66,000 listings on its site. If this trend continues to play out in other high-demand cities, it can pose significant long-term challenges for Airbnb. If fewer Airbnbs are available, prices on these short-term rentals will go down, taking Airbnb’s profits along with it.

It’s More Challenging For Hosts Too

Airbnb isn’t only a pain for locals. Prices have gone up for hosts, and it requires a lot more effort to maintain an Airbnb than a long-term rental property. This analysis from an Airbnb host highlights how the platform has changed and the uphill battle involved with maintaining these types of properties.

Many Airbnb hosts are willing to put up with these headwinds because the profits are still higher than long-term rentals. That makes sense since Airbnb requires a lot more work than those types of properties.

However, it’s another bit of resentment that is building on a platform that has become the villain in the eyes of many voters in big cities. The possibility of political action against Airbnb may cause hosts to think twice or try to abandon the industry as a whole. Saturated competition also makes it harder for new hosts to stand out. These hosts may reduce their prices to get short-term tenants and reduce the profit margins of other Airbnb investors.

Rental Oversupplies And High Interest Rates Also Pose Threats

Some states and cities have experienced a rental oversupply. With many people pursuing the same investment opportunity, buyers are starting to gain more leverage, translating into lower prices. If rental income is too low, it becomes unsustainable for some hosts to stay afloat.

High interest rates also make it difficult for new hosts to stick around, especially people who want to expand their Airbnb portfolios. The Federal Reserve has hinted at a cumulative 0.50% rate cut by the end of the year, but rates still remain high. That headwind, combined with the others mentioned, doesn’t paint the best picture for Airbnb stock in the long run.

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