Why TripAdvisor’s Stock Fell Over 50% in The Last 4 Years

TripAdvisor‘s (NASDAQ: TRIP) stock price lost 54% in the last 4 years, trading from about $63 in February 2016 to $29 in February 2020. While part of the decrease was due to a lack of net income margin growth, a bulk of the decline in the company’s stock price came from the markets assigning the company a lower P/E multiple.

We have created an interactive dashboard on TripAdvisor’s Stock Price Change where we factorize the decrease in TripAdvisor’s stock price, breaking it down into a change in Revenue, Margins, and P/E Multiple.

#1. TripAdvisor’s Total Revenue has grown 5% from $1.48 billion in 2016 to almost $1.56 billion in 2019 and is expected to grow by 2% to around $1.59 billion in 2020.

Revenue growth of about $30 million in 2020 to be driven by the growth of about $90 million from Experiences & Dining and decline of about $70 million from its Hotel, Media & Platform revenues.

• Overall, TripAdvisor’s revenue increased from $1.48 billion in 2016 to $1.56 billion in 2019, largely driven by its Experiences and Dining segment.
• We expect revenue to grow slightly by 2% to about $1.59 billion in 2020, driven by its non-Hotel segments.
• TripAdvisor’s Hotel revenues have been on a declining trend in the last few years, having lost more than $100 million in revenues since 2015. The primary reason for this decline was lower click-based advertising revenues on TripAdvisor-branded websites.
• Going forward, we expect TripAdvisor to continue to see declines in Hotel revenues in 2020, due to a continued negative impact from marketing pullbacks and some additional currency headwinds. The company is also facing aggressive competition from Google as it is pushing its own hotel products in search results.
• We expect Hotels, Media & Platform segment to decline 7% year-over-year (y-o-y) to $872 million in 2020. We also expect Experiences & Dining revenues to grow 20% y-o-y to $548 million in 2020.

#2. Net Income grew from $120 million in 2016 to $126 million in 2019

A sharp decline in 2017 was driven by one-time tax benefits due to the TCJ Act. We expect net income to rise to $160.8 million in 2020.

• TripAdvisor’s net income grew from $120 million in 2016 to $126 million in 2019, which can be attributed to lower margins and valuation multiple.
• Net income margin declined from 8.1% in 2016 to -1.2% in 2017. This was followed by a rise to 7.0% in 2018 and 8.1% in 2019.
• We discuss the factors that impacted the margins in detail in our dashboard.

#3. Price-To-Earnings (P/E) multiple for TripAdvisor has been volatile over the years but is lower than what it was in 2016.

The current P/E is also lower than that for its peers Expedia and Booking Holdings.

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