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Why Is TripAdvisor (TRIP) Up 50.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for TripAdvisor (TRIP). Shares have added about 50.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is TripAdvisor due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

TripAdvisor Q3 Loss Narrower Than Expected, Sales Top

TripAdvisor Inc. reported adjusted third-quarter 2020 loss of 17 cents per share, narrower than the Zacks Consensus Estimate of a loss of 29 cents. Earnings of 58 cents per share were reported in the year-ago quarter.

Revenues for the third quarter were $151 million, surpassing the Zacks Consensus Estimate by 2.3%. However, the top line was down 65% year over year.

For July, August, and September, monthly unique users on Tripadvisor sites were approximately 67%, 73%, and 74%, respectively.

Revenue Segments

TripAdvisor reports revenues in three segments: Hotels, Media & Platform, Experiences & Dining, and Other.

Revenues of $80 million (accounting for 53% of total revenues) from the Hotels, Media & Platform segment were down 66% from the year-ago quarter.

Revenues of $53 million from the Experiences & Dining segment, which accounted for 35% of total revenues, were also down 62% year over year.

The Other segment contributed the remaining 12% to total revenues. This segment includes revenues from rentals, SmarterTravel, Flights/Cruise and TripAdvisor China. Revenues from this segment were $18 million, down 63% from the year-ago quarter.

Operating Results

TripAdvisor’s operating expenses (selling & marketing, technology & content, and general & administrative) of $151 million were down 50.2% from $303 million a year ago. Operating loss was $46 million for the third quarter versus operating profit of 68 million in the year-ago period.

On a GAAP basis, the company recorded net loss of $48 million or loss of 36 cents per share versus net income of $50 million or earnings of 36 cents in the prior-year quarter.

Balance Sheet & Cash Flow

TripAdvisor exited the quarter with cash and cash equivalents of roughly $446 million, down from $698 million recorded in the second quarter.

Accounts receivables were $91 million, up from $74 million in the second quarter.

As of Sep 30, 2020, the company had a long-term debt of $490 million.

Cash flow from operations was ($31) million versus ($78) million in the second quarter. Capex was $15 million, in line with the second quarter. Free cash flow was ($42) million versus ($93) million in the second quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -85.35% due to these changes.

VGM Scores

Currently, TripAdvisor has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TripAdvisor has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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