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Why Is TripAdvisor (TRIP) Down 22.3% Since the Last Earnings Report?
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It has been about a month since the last earnings report for TripAdvisor, Inc. (TRIP - Free Report) . Shares have lost about 22.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
TripAdvisor Q1 Earnings & Revenues Miss Estimates
TripAdvisor Inc. reported adjusted first-quarter 2017 earnings of 16 cents per share, missing the Zacks Consensus Estimate of by a penny. Adjusted earnings exclude one-time items but include stock-based compensation expense.
In 2016, the instant booking rollout had led to significant revenue headwinds, muting revenue growth, thereby impacting profitability. Lately, the company has been making efforts to get travelers to book hotels directly on its website instead of just using it as a review site. These efforts led to an increase in the company’s clicked-based advertising and transaction revenues, expanding its top-line growth in the quarter.
Revenues
TripAdvisor reported revenues of $372 million in the first quarter, reflecting an increase of 17.7% sequentially and 5.7% year over year. The increase was driven by strength in clicked-based advertising and transaction revenues.
However, revenues missed the Zacks Consensus Estimate of $379 million.
Revenue Segments
TripAdvisor reports its revenue under two segments: Hotel and Other.
Revenues of $314 million from the Hotel segment increased 25% sequentially and 4% from the year-ago quarter but made up 84% of total revenue. This segment includes click, display, subscription and transaction-based revenues from hotels, air and cruise, including that from the company’s largest subsidiary, SmarterTravel, as well as from operations in China.
Revenues of $58 million from the Other segment decreased 9% sequentially and 18% year over year and contributed the remaining 16% of the total revenue. This segment includes revenues from attractions, restaurants and vacation rentals businesses.
Revenues by Source
Revenues of $211 million from Click-based advertising increased 12% from the year-ago quarter and accounted for 57% of the total revenue. Revenues from Display-based advertising decreased 4% year over year to $65.0 million and brought home 17% of total revenue. The other hotel revenue component was $38 million, reflecting a decrease of 17% year over year and accounted for 10% of total revenue. Non-Hotel revenue component contributed the remaining 16%, accounting for $58 million in revenues, up 18% year over year.
Operating Results
TripAdvisor’s adjusted operating expenses of $328 million increased 13.1% sequentially and 11.6% year over year. The adjusted operating margin of 9.4% was up 371 bps sequentially but down 480 bps from the year ago-quarter.
On a GAAP basis, TripAdvisor’s net profit was $13 million or 9 cents per share, declining from the year-ago figure of $29 million or 20 cents.
Pro forma earnings declined to 16 cents per share from 22 cents in first-quarter 2016.
Balance Sheet & Cash Flow
TripAdvisor exited the quarter with cash, cash equivalents and short-term investments of roughly $746 million, slightly up from $730 million in the prior quarter. Accounts receivables were $232 million, up from $189 million in the last quarter.
Long-term debt was $210 million in the first quarter compared with $91 million in the previous quarter.
Cash flow from operations was $134 million, significantly up from $46 million in the previous quarter. Capex was $18 million, up from $16 million in the fourth quarter. Free cash flow was $116 million, significantly up from $30 million in the previous quarter.
During the quarter, the company repurchased 3,529,923 shares for approximately $150 million.
Our Take
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. The company reported a weak first quarter with both the top line and the bottom line missing our estimates.
The company’s growth initiatives to boost hotel bookings from its own website have helped the company to expand its top-line growth. Moreover, strong focus on developing its mobile products, expansion into the international restaurant reservation space and improvement in user growth and engagement, especially related to mobile devices, are positives.
Additionally, TripAdvisor’s acquisitions complement its travel product portfolio. These also improve efficiency and expand user base, on the one hand, while increasing traffic, hotel shoppers and profits, on the other. The company is well positioned to grow, given its expanding user base, improving margins and increasing monetization of social and mobile platforms in the long term.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 9.3% due to these changes.
At this time, TripAdvisor's stock has an average Growth Score of 'C', however its Momentum is lagging a bit with a 'D'. The stock was allocated a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is solely suitable for growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is TripAdvisor (TRIP) Down 22.3% Since the Last Earnings Report?
It has been about a month since the last earnings report for TripAdvisor, Inc. (TRIP - Free Report) . Shares have lost about 22.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
TripAdvisor Q1 Earnings & Revenues Miss Estimates
Operating Results
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted downward by 9.3% due to these changes.
TripAdvisor, Inc. Price and Consensus
TripAdvisor, Inc. Price and Consensus | TripAdvisor, Inc. Quote
VGM Scores
At this time, TripAdvisor's stock has an average Growth Score of 'C', however its Momentum is lagging a bit with a 'D'. The stock was allocated a grade of 'F' on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is solely suitable for growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.