Airbnb (ABNB) needs to durably accelerate room night growth through near-term initiatives, while also demonstrating how its platform-specific GenAI offerings will drive faster growth, Morgan Stanley said in a note Friday.

The initiatives include improved suggestion algorithms, new supply and hotels, rate transparency, and Reserve Now, Pay Later. The brokerage also highlighted emerging horizontal AI agents like ChatGPT and Gemini as potential competitive factors Airbnb must navigate.

The company is investing in next-generation AI improvements including AI search, easier supply on-boarding, customer service automation and internal engineering tools. The investment firm highlighted the initiatives behind growth amid the ongoing GenAI-driven volatility.

Morgan Stanley said Airbnb trades at roughly a 40% premium to its peer Booking (BKNG) on a growth-adjusted core profit basis and that its investments need to drive faster booking and revenue growth to justify that premium valuation.

The firm trimmed its price target on the company's stock to $120 from $130.

Shares of Airbnb rose around 5.2% in recent trading.

Price: 122.01, Change: +6.05, Percent Change: +5.21