After an 11% decline year-to-date (YTD), at the current price of around $16 per share, we believe Tripadvisor’s stock (NASDAQ: TRIP), an online travel company providing booking for hotel reservations, transportation, lodging, and travel experiences, could see pressure in the short term, but high growth in the medium to long term. TRIP stock has declined from around $18 to $16 YTD, underperforming the broader indices, with the S&P growing 14% during the same period. The company’s financial results for both 2020 and 2021 were significantly impacted due to the decrease in travel demand related to Covid-19. However, TRIP experienced a recovery in travel demand and strong growth in gross bookings from pre-Covid levels in 2022. The company’s stock has declined this year due to mixed results in the fiscal first half of 2023. Rising costs have been impacting the company’s profitability. However, Tripadvisor’s Viator segment appears to be growing rapidly and is now making up a significant portion of total revenue. Viator is a pure-play experiences online travel agency singularly focused on the needs of both travelers and operators. It offers bookable tours, activities, and attractions with over 300,000 experiences from more than 50,000 operators available to travelers. Tripadvisor appears to have ample liquidity with $1.1 billion in cash on the balance sheet, and about $492 million and $342 million in long-term debt maturities in 2025 and 2026, respectively.
Interestingly, Tripadvisor’s stock had a Sharpe Ratio of -0.1 since early 2017, which is much lower than the figure of 0.6 for the S&P 500 Index over the same period. Compare this with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
Tripadvisor’s sales shot higher in the fiscal first half as compared to pandemic-pressured results a year ago. The company’s revenues rose 27% year-over-year (y-o-y) to $865 million. The Viator segment delivered a particularly strong performance as revenue grew a robust 72% y-o-y to $331 million. Yet the business wasn’t able to profit from that higher revenue base. In the first six months of 2023, the travel platform posted a negative $0.35 in diluted earnings per share compared to a negative 2 cents in the same period a year ago. The company spent aggressively on marketing and technology development, especially in the Viator and core Tripadvisor platforms.
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We have revised Tripadvisor’s valuation to $18 per share, based on a $1.04 expected EPS and a 17.0x P/E multiple for the fiscal year 2023 – almost 14% higher than the current market price. We forecast Tripadvisor’s Revenues to be $1.7 billion for the fiscal year 2023, up 16% y-o-y.
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.
|S&P 500 Return||2%||14%||95%|
|Trefis Reinforced Value Portfolio||0%||24%||535%|
 Month-to-date and year-to-date as of 10/11/2023
 Cumulative total returns since the end of 2016
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