TripAdvisor Inc. TRIP recently announced a private offering of senior unsecured notes aggregating $500 million.
These notes carry a coupon rate of 7.000% and are due to mature in 2025. The online travel company stated that the transaction proceeds will be used for general corporate purposes.
As of Mar 31, 2020, cash and short-term investments totaled $798 million, up from $319 million recorded in the fourth quarter. During March, the company borrowed $700 million from the revolving credit facility in a bid to enhance liquidity.
TripAdvisor generated ($70) million cash from operations during the last reported quarter, down from $59 million in the prior quarter. Capex was $20 million, down from $22 million in the fourth quarter. Free cash flow was ($90) million in the first quarter.
We believe that the company has a strong balance sheet, which will help it capitalize on investment opportunities and pursue strategic acquisitions, thereby further improving prospects.
In our view, the senior notes’ offering will bring down the company’s cost of capital, in turn strengthening the balance sheet and supporting growth.
TripAdvisor, Inc. Price and Consensus
TripAdvisor, Inc. price-consensus-chart | TripAdvisor, Inc. Quote
Leading credit rating agency Moody's assigned a Ba3 rating and stable outlook to TripAdvisor.
The rating has been assigned based on a weak global travel market due to COVID-19-induced travel bans and the need for physical distancing. Moody's expects travel volume to remain weak in the near term. The rating agency also expects Tripadvisor revenues and profit margins to remain under pressure owing to the COVID-19 pandemic and uncertainties in the global economic outlook.
However, Moody's believes that Tripadvisor will be able to navigate through these current challenges. Moody’s assigned a stable outlook on the rating, based on the belief that Tripadvisor has a good liquidity profile and the ability to generate free cash flow even at lower revenue levels.
Zacks Rank & Stocks to Consider
Currently, TripAdvisor has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Wayfair Inc. W, eBay EBAY and Amazon AMZN. While Wayfair and eBay sport a Zacks Rank #1 (Strong Buy), Amazon carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Wayfair, eBay, and Amazon is currently projected at 23%, 12.4% and 24.5%, respectively.
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