TripAdvisor falls as co. discusses rising costs

TripAdvisor drops as co. predicts marketing costs will rise quicker than revenue in 2013

Associated Press

NEW YORK (AP) -- TripAdvisor's stock fell Thursday as the online travel company predicted higher marketing costs this year.

THE SPARK: Late Wednesday TripAdvisor reported growth in fourth-quarter adjusted profit and revenue that topped analyst expectations.

The company anticipates that revenue will grow by slightly more than 20 percent in 2013 after growing 20 percent last year.

But it also plans to spend more on marketing. On a conference call with analysts, TripAdvisor's Chief Financial Officer Julie Bradley said that sales and marketing costs will increase from more than 30 percent of revenue to somewhere more than 40 percent but less than half of revenue this year.

THE BIG PICTURE: TripAdvisor Inc., based in Newton, Mass., allows users to post reviews of airlines, hotels and vacation resorts on its websites. It gets revenue from advertising on those properties, which include airfarewatchdog.com, bookingbuddy.com and virtualtourist.com. It was spun off from Expedia Inc. in 2011 in an initial public offering of stock.

THE ANALYSIS: A planned marketing campaign, investments in social media and other marketing initiatives will pressure TripAdvisor's profitability, said Brian Fitzgerald of Jefferies in a client note Thursday. He kept a "Hold" rating and $37 price target on the shares.

TripAdvisor's makeover of its display on its website and tablet app could also weigh on revenue, said Janney Capital Markets' Brian Mullan. Still, he said the transition made sense, and kept a "Buy" rating.

TripAdvisor acknowledged that the rollout might pressure sales in the first half, but said it won't hurt the company's ability to make money over the long term.

SHARE ACTION: Shares of TripAdvisor Inc. declined $3.36, or 7.2 percent, to $43.54 in afternoon trading. The stock hit a 12-month high of $49.35 last week.

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