Up 26% Already This Year, What Is Next For Tripadvisor Stock?

After a 26% growth since the beginning of 2024, at the current price of around $27 per share, we believe Tripadvisor’s stock (NASDAQ: TRIP), an online travel company providing booking for hotel reservations, transportation, lodging, and travel experiences, is fairly priced and could likely be pressured in the short to medium term. TRIP stock has increased from around $21 to $27 YTD, outperforming the broader indices, with the S&P growing 8% during the same period. Liberty Tripadvisor Holdings (LTRPA) has stated its intention to engage in discussions regarding a potential acquisition, prompting the formation of a special committee to evaluate proposals resulting from these discussions. It should be noted that LTRPA owns 21.1% of Tripadvisors’ shares outstanding and TRIP’s stock price has gained traction since this announcement. That said, Tripadvisor stock has been struggling for years as its audiences have moved elsewhere and the demand for online advertising has been weak due to tough competition from Google. It is difficult to compare Tripadvisor’s current business with its previous business model because it has reorganized over the years. However, in 2019, the company’s Tripadvisor brand (representing 60% of its sales then) generated revenue of $939 million. By comparison, in 2023 the company’s Tripadvisor Core brand (~58% of sales now) generated a total revenue of $1,031 million – signaling only a small revenue growth during this period. In addition, Tripadvisor’s gross margins have always been consistently more than 90%. But still, despite such high margins, the company’s profits have been scarce and far between through the years, largely due to higher spending on sales and marketing.

TRIP stock has seen a decline of 15% from levels of $30 in early January 2021 to around $27 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. Notably, TRIP stock has underperformed the broader market in each of the last 3 years. Returns for the stock were -5% in 2021, -34% in 2022, and 20% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that TRIP underperformed the S&P in 2021, 2022, and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Information Technology sector including MSFT, AAPL, and NVDA, and even for the megacap stars GOOG, TSLA, and AMZN. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could TRIP face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?

Tripadvisor’s sales shot higher in fiscal 2023 to an all-time high value of $1.8 billion, reflecting a 20% annual growth. Net income for the full year was $10 million, or $0.08 diluted EPS – down 42% year-over-year (y-o-y). The company spent aggressively on marketing and technology development, especially in the Viator and core Tripadvisor platforms. The company’s Q4 revenues rose 10% y-o-y to $390 million. Its adjusted Q4 EBITDA of $84 million, or 22% of revenue, came in better than expected due to a favorable channel mix and disciplined marketing spending. Viator allows third parties to list bookable experiences on its platform. It then collects the payment through travelers’ bookings, pays the experience organizer, and keeps a cut for itself in a much similar way to how Airbnb does business. Viator now contributes to 40% of total revenues and its revenues grew almost 50% y-o-y to $737 million in FY 2023.

We have revised Tripadvisor’s valuation to $26 per share, based on a $1.07 expected EPS and a 23.9x P/E multiple for the fiscal year 2024 – almost 4% lower than the current market price. We forecast Tripadvisor’s Revenues to be nearly $2 billion for the fiscal year 2024, up 10% y-o-y.

It is helpful to see how its peers stack up. TRIP Peers shows how Tripadvisor’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 3/5/2024
[2] Cumulative total returns since the end of 2016