Airbnb was downgraded to underperform from buy with a $103 price target, representing a 26% downside from the stock's closing price on Friday of $139.25.
"An overwhelming majority of investors we’ve spoken with have been unable to justify Airbnb’s valuation premium relative to OTAs and expressed interest in realizing their quick gains," said analyst Robert Mollins. "Investors that we’ve spoken with like Airbnb’s business model and want to be long-term holders, but are now looking at selling the stock because they no longer feel comfortable owning it trading at a 300-400% valuation premium to OTAs."
Airbnb shares were down 7% to $129.50 in trading Monday.
The stock's valuation is "more than stretched" when compared to other stocks in the online travel space, according to Mollins, who places Airbnb in the same category as Booking Holdings (BKNG) - Get Report and Expedia (EXPE) - Get Report.
The downgrade came just days after the firm's initiation of the stock with a buy rating and $77 price target.
At the time, the firm said Airbnb's IPO was well timed, allowing investors to get in on the company when its gross book volume was artificially low due to the coronavirus pandemic.
However, the stock began trading with a $100 billion market valuation after it priced its initial public offering at $68 a share, more than 50% higher than its original target.