Should You Buy Tripadvisor Stock Post Q1 Beat?

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Tripadvisor

[Updated 08/10/2021] Tripadvisor stock update

Tripadvisor’s stock (NASDAQ: TRIP) has seen a 25% rise so far this year to $36 currently, outperforming the broader markets with the S&P 500 up 18%. We expect the company’s stock to grow in the medium term, based on the solid Q2 report, re-openings across the globe, and pent-up travel demand in countries where large populations have been vaccinated. While the growing Delta variant cases can dampen this growth in the near term, we believe that the company’s recovery still remains on a positive trajectory. That said, the travel search and user review company has a strong balance sheet to safeguard it from the downturn – with a cash balance of $775 million and another $1 billion in liquidity, while its outstanding debt stands at $830 million as of June 2021.

In the recent Q2, Tripadvisor beat revenue and earnings estimates despite posting an earnings loss. The company’s revenues were up 91% sequentially from $123 million in Q1 2021 to $235 million in Q2 2021 and were up 300% from a mere 59 million in the corresponding quarter in 2020. All lines of business saw an increase in revenue year-over-year, with hotels and media services up 311% to $156 million and experiences and dining up 386% to $68 million. It is also worth mentioning that Tripadvisor’s monthly users on its website increased each month of Q2 2021 – reaching 59%, 71%, and 79%, of 2019’s comparable periods, respectively, through April, May, and June. To add to this, U.S. monthly unique users in June 2021 were 85% of June 2019 levels, and European monthly unique users exceeded 90% of the comparable 2019 level, as the regions continued to increase vaccination numbers.

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Tripadvisor also fully rolled out Tripadvisor Plus subscription service (only in the U.S.) at a cost of $99 per year in Q2, as subscription fees have been popular with companies as a way to build up loyalty and grow business. To give some perspective on this service, Tripadvisor saw around 400 million unique monthly active users pre-Covid and already has more than 100 million users (which is currently a free service). Tripadvisor Plus includes discounts on many tickets, tours, and attractions, and personalized travel advice as well as discounted stays at more than 100,000 hotels around the world. The company expects the service to save members an average of $350 per stay.

Going by our Tripadvisor Valuation, with a revenue per share (RPS) estimate of around $6.49 and P/S multiple of 6.2x in fiscal 2021, this translates into a price of $41, which reflects a nearly 13% premium to the current market price of $36.

[Updated 08/04/2021] Tripadvisor Q2 Earnings preview

Tripadvisor (NASDAQ: TRIP), an online travel company providing booking for hotel reservations, transportation, lodging, travel experiences, and restaurants, is scheduled to announce its fiscal second-quarter results on Thursday, August 5. We expect Tripadvisor’s stock to likely trade higher post Q2 results with both revenues and earnings beating consensus estimates. The company’s business grew modestly in the first quarter of 2021, as it benefited from the pent-up travel demand in countries where large populations have been vaccinated. The U.S. economy, in particular, is expected to see a travel rebound as most of the pandemic restrictions are easing (mostly during Q2) and 49.7% of the U.S. population is fully vaccinated. That said, air travel and vacation trends likely won’t fully recover until the Covid-19 threat has passed, but vaccination has led consumers back to planning leisure travel. However, the recent surges in new Covid cases of the Delta variant may change that going forward.

Our forecast indicates that Tripadvisor’s valuation is at $43 per share, which is 16% higher than the current market price of $37. Look at our interactive dashboard analysis on Tripadvisor Pre-Earnings: What To Expect in Q2? for more details.

(1) Revenues expected to come ahead of consensus estimates

Trefis estimates Tripadvisor’s Q2 2021 revenues to be around $192 Mil, 2% above the consensus estimate. The company’s revenues were up 6% sequentially from $116 million in Q4 2020 to $123 million in Q1 2021. However, TRIP’s revenues declined 56% from year-ago quarter levels in Q1 and also stood at about 33% of 2019’s comparable period. It is also worth mentioning that Tripadvisor’s monthly users on its website increased slightly each month of Q1 2021 – reaching 53%, 56%, and 58% of 2019’s comparable periods respectively through January, February, and March.

Tripadvisor has been looking at a recurring revenue stream and has launched its new travel subscription (only in the U.S.) that will cost $99 per year in June 2021. To give some perspective, Tripadvisor already has more than 100 million users, which is currently a free service. In addition, it also saw around 400 million unique monthly active users pre-Covid. Subscription fees have been popular with companies as a way to build up loyalty and grow business. Tripadvisor’s new service includes discounts on many tickets, tours, and attractions, and personalized travel advice as well as discounted stays at more than 100,000 hotels around the world. The company expects the service to save members an average of $350 per stay.

For the full year 2021, we expect Tripadvisor revenues to rise 44% y-o-y to $868 million.

(2) EPS likely to beat consensus estimates

Tripadvisor’s Q2 2021 earnings per share (EPS) is expected to come in at a loss of 9 cents as per Trefis analysis, marginally better than the consensus estimate of -11 cents. While the company has a strong balance sheet to safeguard it from the current downturn (a cash balance of $674 million and another $1 billion in liquidity), reducing its outstanding debt of $830 million will mean relying heavily on the company’s post-pandemic recovery. 

(3) Stock price estimate higher than the current market price

Going by our Tripadvisor’s Valuation, with a revenue per share (RPS) estimate of around $6.48 and a P/S multiple of around 6.6x in fiscal 2021, this translates into a price of $43, which is 16% higher than the current market price of around $37.

It is helpful to see how its peers stack up. Check out Tripadvisor Stock Comparison With Peers to see how Tripadvisor compares against peers on metrics that matter.

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