Shares of TripAdvisor Inc. (TRIP 5.57%) fell 21.6% in the month of February, according to data provided by S&P Global Market Intelligence, after the online travel specialist released disappointing fourth-quarter 2016 results.
More specifically, shares of TripAdvisor dropped 11% on February 16, 2017 as the company revealed that quarterly revenue climbed just 2.3% year over year, to $316 million. On the bottom line, that translated to a 65% decline in adjusted net income, to $23 million, or $0.16 per share. Analysts, on average, were modeling higher 6% revenue growth and adjusted earnings of $0.31 per share.
TripAdvisor CFO Ernst Teunissen explained that the bottom-line declines were largely driven by significant investments in the company's growth initiatives. TripAdvisor CEO Steve Kaufer elaborated:
2016 was an important transition year and one of great progress toward creating the best user experience in travel. We rolled out hotel instant booking globally and strengthened our position in Attractions, Restaurants and Vacation Rentals. With our price comparison and booking capabilities in place, we are focused on raising consumer awareness of TripAdvisor as a great place to go to price shop and book.
At the same time, management admitted in the company's prepared remarks that the rollout of instant booking significantly muted revenue growth and profitability last year, which meant losing valuable resources that competitors were spending on marketing. However, TripAdvisor also saw improvements in click-based and transaction revenue growth last quarter, and those trends have proved sustainable through the first half of the current quarter. What's more, recent comments from TripAdvisor chairman Greg Maffei have led to speculation that it may be an acquisition or merger target, as he noted potential buyers like Facebook, Amazon, and Alibaba are providing a floor for the stock.
That might well be true with shares still down 33% over the past year, especially if TripAdvisor's strategic investments have indeed helped the company turn the corner toward accelerated growth. So while I'm personally content watching TripAdvisor's progress from the sidelines, now could be a great time for long-term investors to open or add to their positions.