What happened
Shares of TripAdvisor (TRIP 4.61%) trailed the market by a wide margin this week, shedding 14% through Thursday trading compared to a 2% decline in the S&P 500. That decline pushed shares further into negative territory for the year, according to data provided by S&P Global Market Intelligence. The wider market, meanwhile, is up 17% so far in 2023.
The slump this week came after TripAdvisor announced its second-quarter earnings that showed struggles in some parts of its travel booking business.
So what
Most of the business performed as management had expected in the period that ran through late June. TripAdvisor saw strength in its experiences segment that includes things like tours and restaurant bookings.
But its core hotel segment underperformed, rising by just 2%. That increase implies market share struggles given the strong demand for travel experiences through early summer. Still, executives sought to stress the company's success in boosting overall sales by 18%. "We delivered healthy revenue growth on a consolidated basis," CEO Matt Goldberg said in a press release.
On the downside, many of TripAdvisor's key financial metrics worsened in Q2. Earnings declined and free cash flow fell to $90 million from $282 million a year ago.
Now what
Executives say they will focus in the coming months on cutting costs and boosting the efficiency of the business, ideally without sacrificing investments in growth initiatives. "We will take an approach that balances financial discipline with executing our strategic priorities," Goldberg explained. These priorities include incorporating generative AI into the trip planning tool to make the process more engaging for shoppers.
In the meantime, shares might continue underperforming the market until investors see concrete signs that TripAdvisor is able to achieve both stronger growth and improving financial metrics like profitability and cash flow. The core hotel business needs to see better market share, too, for the stock to reverse its 2023 slide and begin generating positive returns for shareholders from here.
