Why Has Tripadvisor Stock Slumped 35% This Year?

Tripadvisor stock (NASDAQ: TRIP) has declined from around $21 at the beginning of the year to $14 now – a 35% fall over a period when the benchmark S&P index grew 16%. In comparison, TRIP’s peer Booking Holdings (NASDAQ: BKNG) has seen its stock rise 8% during the same period.

Tripadvisor is an online travel company providing booking for hotel reservations, transportation, lodging, and travel experiences. The company’s 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 Alphabet (Google) (NASDAQ: GOOG). We believe that Tripadvisor could see pressures in the short term with only limited growth potential in the medium to long term.

It isn’t easy to compare Tripadvisor’s current business with its previous business model because it has undergone reorganizations 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) generated a total revenue of $1,031 million – signaling only a small revenue growth during this period. In the recent Q2, the core brand contributed 50% to total revenues. A sizeable slowdown in core revenue share has dragged the company’s stock lower this year. Also, while Tripadvisor’s gross margins have always been consistently more than 90%, the company’s bottom line remains underwhelming largely due to increasing sales and marketing spends.

Notably, TRIP stock has performed worse than 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 contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it 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 around rate cuts and multiple wars, 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?

In Q2, Tripadvisor’s revenue was up 1% year-over-year (y-o-y) at $497 million and its net income was $24 million, or $0.17 diluted EPS – flat y-o-y. The company spent aggressively on marketing and technology development – especially in the Viator and core Tripadvisor platforms. Segment-wise, the company’s core brand saw revenues fall 10% y-o-y to $250 million, whereas Viator and The Fork segments saw their revenues grow 13% and 11%, respectively to $244 million and $42 million. Its adjusted Q2 EBITDA of $97 million, or 20% 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 – similar to how Airbnb does business. Viator is now responsible for 50% of the company’s revenues.

According to Tripadvisor’s guidance, profits will grow this year but revenue will be flat to down in the third quarter, and profit margins will be down approximately 350-450 basis points from last year. We have revised Tripadvisor’s valuation to $15 per share, based on a $12.72 expected revenue per share and a 1.2x P/S multiple for the fiscal year 2024 – slightly higher than the current market price. We forecast Tripadvisor’s Revenues to be about $1.8 billion for the fiscal year 2024, up 2% 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 9/5/2024
[2] Cumulative total returns since the end of 2016