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Bear of the Day: TripAdvisor (TRIP)

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TripAdvisor (TRIP - Free Report) is a Zacks Rank #5 (Strong Sell) that is one of the largest travel research companies in the world. The company offers a platform that allows users to share reviews and opinions for hotels, destination attractions and restaurants. All of which are shut down at the moment.

COVID-19

At the beginning of the year, TRIP had a market cap of about $4 billion. This has been cut in half as the company’s source of income, travel has been eliminated by global governments trying to stop the COVID-19 virus from spreading.

When things open back up, it isn’t clear that things will go smooth for TRIP. Permanent damage has likely been done to the hospitality industry and a quarter of lost revenue will create a lot of uncertainty for the company going forward.

Estimates

Plunging estimates are showing investors there is no reason to be in the stock. The current quarter has seen estimates fall from $0.31 to $0.25 over the last 30 days. The current year has seen a fall from $1.84 to $1.41, a drop of 23%. Every analyst covering the stock has lowered estimates for fiscal year 2020, with 10 revisions lower over the last 60 days.

Previous Earnings Misses

TripAdvisor has had a rough go of it when it comes to EPS.  The company has disappointed on earnings three out of the last five quarters. While last quarter saw a surprise to the upside, the upcoming quarters look to be disastrous. Many analysts have recently cut revenue estimates for the company and the sector as a while. Moreover, the US Travel Association has said that as much as $355 Billion in travel revenue will be wiped out this year

The company recently withdrew its 2020 guidance due to COVID-19 and will likely update when the company reports earnings in May.

In Summary

There is going to be a significant struggle in the travel industry for the rest of the year. Even when the lockdowns are lifted, governments will continue quarantines in certain areas making travel unattractive. Considering the trend from TRIP before the outbreak, I would expect the worse is yet to come. Investors should shy away from any stock in the sector until there is evidence of a turnaround and even solvency.

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