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Why TripAdvisor Inc. Got Clipped Today

By Jeremy Bowman – Updated Nov 9, 2016 at 12:12PM

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Shares of the travel-review website tumbled after the company issued another round of disappointing quarterly results.

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What happened

TripAdvisor Inc. (TRIP 2.85%) stock was getting poor reviews from investors today after the travel-information specialist posted a weak third-quarter earnings report. As of 10.47 a.m. EST, the stock was down 18.3%.

So what 

TripAdvisor is in the middle of several strategic shifts, including traffic moving from desktop to mobile and building out a new business as a travel booking agent like Priceline and Expedia. That transition, though, has been more difficult than the company and analysts expected.

The once high-flying growth stock saw revenue increase just 1.4% in the quarter to $421 million, well below expectations of $439.4 million. On the bottom line, adjusted earnings per share were flat at $0.53, missing estimates by a penny.

Despite the weak performance, CFO Ernst Teunissen said revenue growth improved as well as metrics like transaction revenue per hotel shopper throughout the quarter. He and CEO Steve Kaufer both underscored that the company was "investing for long-term growth." Still, click-based revenue fell 10% in the quarter, weighing on performance, while growth in non-hotel revenue counteracted it.

Now what 

TripAdvisor did not issue guidance, and management's brief comments on the quarter indicate that the company is disappointed with its own results. The stock was a big winner following its 2012 IPO, but shares are down 38% as its quarterly results have consistently disappointed and the company's strategy has not unfolded as expected. The surprise election of Donald Trump also throws more uncertainty into the mix as the travel industry is one of the most sensitive to macroeconomic factors.

TripAdvisor shares remain pricey at a P/E above 30, meaning the stock should keep falling if growth continues to stall.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TripAdvisor. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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