After a 34% decline year-to-date (YTD), at the current price of around $18 per share, we believe Tripadvisor’s stock (NASDAQ: TRIP), an online travel company providing booking for hotel reservations, transportation, lodging, and travel experiences – is fairly priced. TRIP stock has declined from around $28 to $18 YTD, underperforming the broader indices, with the S&P falling about 20% over the same period. The company’s stock traded lower as anxiety over a potential recession, staffing issues with airlines, and higher interest rates have swept over the entire travel sector. The broader concern over the global economy’s health and renewed Covid restrictions in some regions of China gave rise to worries that travel demand could decline over the coming quarters after rebounding this summer. Nonetheless, Tripadvisor entered the summer period with solid momentum, effectively putting the company in a position to take advantage of rising consumer demand in the second quarter as consumers prioritize leisure travel, which had been neglected for the past two years. Also, the U.S. unemployment rate remained near historic lows at 3.6% (as of May) and the employment cost index (measuring the growth of labor compensation) rose 1.4% through the first quarter, a record growth since 2001. Both of these factors point to an improvement in Tripadvisor’s upcoming results going forward. But how the current macroeconomic condition truly impact the company’s business will only be clear in TRIP’s second quarter report scheduled in early August.
Tripadvisor saw a mixed Q1 2022, with revenues beating, but earnings missing estimates marginally. The company managed to double its revenues year-over-year (y-o-y) to $262 million, driven by a recovery in the tourism sector in Q1. Of its two business segments, experiences and dining saw a large improvement, with its revenues rising by almost 230% y-o-y to $92 million. Hotels, media, and platform revenues grew 82% y-o-y. Although the company didn’t quite climb into profitability, it managed to narrow its bottom-line loss per share from -$0.59 to -$0.24.
We have revised Tripadvisor’s valuation to $19 per share, based on a $0.92 expected EPS and a 21.0x P/E multiple for the fiscal year 2022 – almost 5% higher than the current market price. We forecast Tripadvisor’s Revenues to be $1.4 billion for the fiscal year 2022, up 56% y-o-y. In light of rising interest rates and the threat of recession, the market at the moment is uncertain, but any further decline in the company’s stock could be used as an opportunity to buy the stock.
It is also helpful to see how its peers stack up. Check out how Tripadvisor’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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