Tripadvisor Continues to Struggle Amid Market Challenges

Tripadvisor's stock has seen a significant decline of 35% this year, contrasting sharply with the S&P 500's 16% growth. Despite a slight revenue increase, overall performance remains weak due to high competition and increased marketing expenditure.

Date: 09-09-2024

AI Rating: 4

Tripadvisor (NASDAQ: TRIP) has faced substantial challenges in the stock market, evidenced by a 35% decline in stock price from around $21 at the beginning of the year to approximately $14 currently. This downturn starkly contrasts with the benchmark S&P 500 which has appreciated by 16% within the same timeframe. In comparison, its competitor, Booking Holdings (NASDAQ: BKNG), has realized an 8% increase in stock value, highlighting the competitive disadvantage Tripadvisor is currently experiencing.

The company operates in the online travel sector and provides a platform for booking various travel-related services. However, Tripadvisor has been struggling for several years, facing a decline in audience engagement and weak demand for its online advertising -- primarily due to intense competition from Alphabet (Google) (NASDAQ: GOOG).

In terms of revenue growth, Tripadvisor experienced a modest increase from $939 million in 2019 to $1,031 million in 2023, signifying only a small growth over four years. Notably, as of Q2 2023, the Core brand, representing about 58% of sales, contributed 50% to total revenues, indicating the struggling core brand and a 10% year-over-year revenue decline in that segment.

While Tripadvisor maintains impressive gross margins exceeding 90%, their bottom line continues to underperform primarily due to increased sales and marketing expenses. In Q2, Tripadvisor reported a net income of $24 million, translating to a diluted EPS of $0.17, which remained flat year-over-year. Additionally, the adjusted Q2 EBITDA was $97 million, representing 20% of revenue, outperforming expectations due to a favorable channel mix.

Looking forward, the management’s guidance is cautious, forecasting profits to grow this year but projecting that revenue will remain flat or possibly decline in Q3. They also anticipate profit margins to fall between 350-450 basis points from the previous year, indicating further financial strain.

In summary, Tripadvisor’s performance metrics paint a concerning picture for investors, reflecting ongoing struggles with competition, internal operations, and market dynamics. The company has underperformed the S&P in the last three years with returns reported as -5% in 2021, -34% in 2022, and 20% in 2023.

Stocks: TRIP BKNG GOOG