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Can TripAdvisor (TRIP) Turn Around from a Terrible 2016?
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TripAdvisor Inc. (TRIP - Free Report) did not receive any sympathy from the market in 2016. The stock lost 44.12% in the last one year and 37.83% over the last two years. In 2016, however, the S&P 500 registered a wider loss of 46.0%.
Industry-specific problems as well as company-related concerns have been affecting TripAdvisor since long. If these weren’t enough, weak earnings in three consecutive quarters, pulled down the company’s share price.
As a result, TripAdvisor has been underperforming the Zacks categorized Electronic Commerce industry for most of the year. Year to date, the loss recorded by TripAdvisor is double the loss of 11.22% witnessed by the industry.
In order to get a better handle on the important drivers, let's take a quick look at its most recent earnings report.
Weak Q3 for TripAdvisor: The company’s revenues of $421 million increased 7.7% sequentially and 1.4% year over year but missed the Zacks Consensus Estimate of $439.4 million. Also, earnings of 41 cents per share missed the Zacks Consensus Estimate by a penny. Rising expenses due to new initiatives and investments made by the company are hurting its profits.
Cash flow from operations was ($87.0) million, significantly down from $237 million in the previous quarter. This was a major concern for investors. Also, free cash flow was a negative $108.0 million versus $219 million in the previous quarter.
How have estimates been moving since then?
TripAdvisor’s earnings picture doesn’t look good at all right now. Following the Q3 earnings release, investors have seen fresh estimates going downhill. In the last 60 days, five analysts revised their earnings estimates downward for the fourth quarter. Meanwhile, full-year 2016 estimates have also seen six downward revisions, which have pulled down the Zacks Consensus Estimate by 3.6%.
History is not on TripAdvisor’s side, as it has missed our earnings estimate in three of the last four quarters, with the average negative earnings surprise being 2.15%.
TripAdvisor is making good progress in its mobile business with constant upgrades. As a result, mobile traffic has been increasing at a healthy rate. Smartphones are being used widely with laptops and tablets to share travel experiences through social networking sites. This is driving substantial traffic and commerce activity for travel sites. In order to cash in on this opportunity, TripAdvisor is making continuous upgrades to its mobile apps.
The company has developed many travel apps that can be downloaded even when the phone is not connected to Wi-Fi. The apps have received positive reviews and TripAdvisor is optimistic about their growth prospects. This can be seen from the fact that around 50% of TripAdvisor's traffic is now from mobile devices. With a larger audience, the company stands a better chance to boost its advertising revenue.
Secondly, TripAdvisor’s rapidly expanding user base is a big positive. The total number of unique visitors on its websites (per month) increased from 32 million in 2008 to nearly 400 million by 2016-end. The company offers more than 350 million travel reviews and opinions, growing at more than 200 contributions per minute. The rich content helps travelers choose from more than 1.5 million places, thus increasing the user base. TripAdvisor’s business model is primarily driven by the number of unique visitors to its website and therefore an increase in the number of visitors is an important indicator of its revenue growth. Therefore revenues could improve this year.
TripAdvisor’s Instant Booking initiative is rapidly gaining momentum. The initiative allows travelers to book a hotel through TripAdvisor’s booking partners on its mobile site or apps. The entire booking process from selecting a room to disclosing personal and credit details is completed through Instant Booking, thus offering a frictionless booking experience.
Just last month, TripAdvisor finally received Expedia’s (EXPE - Free Report) nod to its instant booking program. Expedia has now agreed to add a select hotel inventory from its brands to the instant booking program. Initially, the bookings will be available on TripAdvisor’s U.S. desktop site. The recent deal with Expedia will boost the world’s largest online travel research company’s user base and conversion rates as users are now more likely to click on advertisers’ links for bookings rather than gathering information. (Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here.)
Outlook
TripAdvisor is an online travel research company that features reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages and travel guides, to name a few. Despite billions of dollars in sales, TripAdvisor’s share is just a fraction of the global online travel market. The rest of the market is highly fragmented with many other smaller players as well as offline operators.
Estimates have been broadly trending downward for the stock. However, the company has been able to stick to a Zacks Rank # 3 (Hold)with its strong focus on developing mobile products, and improvement in user growth and engagement, especially related to mobile devices. Its weak fundamental grade is still definitely a concern.
Right now, it’s too early to tell whether TripAdvisor will be able to turn it around in 2017. If the company can successfully work on its strategies, investors could be in for a nice ride, but that is a big if. Shares might also get a boost if the company comes up with a robust fourth-quarter earnings report.
Stamps.com delivered a positive earnings surprise of 66.72% in the trailing four quarters.
Cognex Corporation delivered a positive earnings surprise of 24.92% in the trailing four quarters.
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Can TripAdvisor (TRIP) Turn Around from a Terrible 2016?
TripAdvisor Inc. (TRIP - Free Report) did not receive any sympathy from the market in 2016. The stock lost 44.12% in the last one year and 37.83% over the last two years. In 2016, however, the S&P 500 registered a wider loss of 46.0%.
Industry-specific problems as well as company-related concerns have been affecting TripAdvisor since long. If these weren’t enough, weak earnings in three consecutive quarters, pulled down the company’s share price.
As a result, TripAdvisor has been underperforming the Zacks categorized Electronic Commerce industry for most of the year. Year to date, the loss recorded by TripAdvisor is double the loss of 11.22% witnessed by the industry.
In order to get a better handle on the important drivers, let's take a quick look at its most recent earnings report.
Weak Q3 for TripAdvisor: The company’s revenues of $421 million increased 7.7% sequentially and 1.4% year over year but missed the Zacks Consensus Estimate of $439.4 million. Also, earnings of 41 cents per share missed the Zacks Consensus Estimate by a penny. Rising expenses due to new initiatives and investments made by the company are hurting its profits.
Cash flow from operations was ($87.0) million, significantly down from $237 million in the previous quarter. This was a major concern for investors. Also, free cash flow was a negative $108.0 million versus $219 million in the previous quarter.
How have estimates been moving since then?
TripAdvisor’s earnings picture doesn’t look good at all right now. Following the Q3 earnings release, investors have seen fresh estimates going downhill. In the last 60 days, five analysts revised their earnings estimates downward for the fourth quarter. Meanwhile, full-year 2016 estimates have also seen six downward revisions, which have pulled down the Zacks Consensus Estimate by 3.6%.
History is not on TripAdvisor’s side, as it has missed our earnings estimate in three of the last four quarters, with the average negative earnings surprise being 2.15%.
TRIPADVISOR INC Price, Consensus and EPS Surprise
TRIPADVISOR INC Price, Consensus and EPS Surprise | TRIPADVISOR INC Quote
Can TripAdvisor Recover in 2017?
TripAdvisor is making good progress in its mobile business with constant upgrades. As a result, mobile traffic has been increasing at a healthy rate. Smartphones are being used widely with laptops and tablets to share travel experiences through social networking sites. This is driving substantial traffic and commerce activity for travel sites. In order to cash in on this opportunity, TripAdvisor is making continuous upgrades to its mobile apps.
The company has developed many travel apps that can be downloaded even when the phone is not connected to Wi-Fi. The apps have received positive reviews and TripAdvisor is optimistic about their growth prospects. This can be seen from the fact that around 50% of TripAdvisor's traffic is now from mobile devices. With a larger audience, the company stands a better chance to boost its advertising revenue.
Secondly, TripAdvisor’s rapidly expanding user base is a big positive. The total number of unique visitors on its websites (per month) increased from 32 million in 2008 to nearly 400 million by 2016-end. The company offers more than 350 million travel reviews and opinions, growing at more than 200 contributions per minute. The rich content helps travelers choose from more than 1.5 million places, thus increasing the user base. TripAdvisor’s business model is primarily driven by the number of unique visitors to its website and therefore an increase in the number of visitors is an important indicator of its revenue growth. Therefore revenues could improve this year.
TripAdvisor’s Instant Booking initiative is rapidly gaining momentum. The initiative allows travelers to book a hotel through TripAdvisor’s booking partners on its mobile site or apps. The entire booking process from selecting a room to disclosing personal and credit details is completed through Instant Booking, thus offering a frictionless booking experience.
Just last month, TripAdvisor finally received Expedia’s (EXPE - Free Report) nod to its instant booking program. Expedia has now agreed to add a select hotel inventory from its brands to the instant booking program. Initially, the bookings will be available on TripAdvisor’s U.S. desktop site. The recent deal with Expedia will boost the world’s largest online travel research company’s user base and conversion rates as users are now more likely to click on advertisers’ links for bookings rather than gathering information. (Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here.)
Outlook
TripAdvisor is an online travel research company that features reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages and travel guides, to name a few. Despite billions of dollars in sales, TripAdvisor’s share is just a fraction of the global online travel market. The rest of the market is highly fragmented with many other smaller players as well as offline operators.
Estimates have been broadly trending downward for the stock. However, the company has been able to stick to a Zacks Rank # 3 (Hold)with its strong focus on developing mobile products, and improvement in user growth and engagement, especially related to mobile devices. Its weak fundamental grade is still definitely a concern.
Right now, it’s too early to tell whether TripAdvisor will be able to turn it around in 2017. If the company can successfully work on its strategies, investors could be in for a nice ride, but that is a big if. Shares might also get a boost if the company comes up with a robust fourth-quarter earnings report.
Key Picks
Some stocks in the industry worth considering include Stamps.com Inc. and Cognex Corporation (CGNX - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Stamps.com delivered a positive earnings surprise of 66.72% in the trailing four quarters.
Cognex Corporation delivered a positive earnings surprise of 24.92% in the trailing four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>