Why TripAdvisor's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of TripAdvisor (NASDAQ: TRIP  ) fell 10% in early trading, after the company released earnings.

So what: The fourth quarter wasn't bad, with revenue up 23%, to $169.4 million, and earnings per share up 44%, to $0.23, both ahead of estimates. The problem is that management expects marketing costs to push higher in 2013, putting pressure on profits.  

Now what: The company did show strong growth, so it isn't a reason for wholesale panic today. The challenge is that the stock is priced for perfection at 24 times forward earnings estimates. I'm not yet a buyer today, but if you are long the stock, I wouldn't jump ship just yet.

Interested in more info on TripAdvisor? Add it to your watchlist by clicking here.


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