What happened
Shares of TripAdvisor, Inc. (TRIP -0.27%) have exploded this year as the travel-recommendation service blew past estimates in its first-quarter earnings report and seemed to show that the worst of the company's turnaround efforts is behind it. The stock surged again at the beginning of June, though it wasn't exactly clear why. As of July 9, the stock had gained 68% in 2018 according to data from S&P Global Market Intelligence.
As the chart below shows, the major driver of the stock's growth was the jump in May following its earnings report.
So what
TripAdvisor came in to 2018 with the stock having fallen sharply in recent years, losing more than two-thirds from its 2014 peak above $100. However, the stock jumped following both of its earnings reports this year, a sign that management is now delivering ahead of expectations. The stock jumped 15% on February 6 on rumors of a potential buyout. While those appeared to be unfounded, the stock continued to gain later that month after its fourth-quarter earnings report came out, as the company beat revenue estimates and posted better-than-expected guidance for 2018. Shares gained 4% on February 15, when the report came out.
Image source: Tripadvisor.
The company followed that up with another surge in May as its first-quarter report came out. Revenue ticked up 2% to $372 million, and adjusted earnings per share increased from $0.24 to $0.30 as marketing expenses as a percentage of revenue fell. The non-hotel segment was strong as the company is generating more business from restaurants and experiences, and the decline in hotel revenue eased. The stock jumped 23% on May 9 on the news.
Now what
What was particularly encouraging for investors was that management raised its adjusted EBITDA guidance from flat for the year to positive in its most recent earnings report, and it also said it expected revenue trends to improve later in the year.
While the company's P/E ratio has ballooned with this year's growth and is now above 50, TripAdvisor, with its strength in recommendations, is unique among online travel agencies. If momentum continues to build, the stock could easily move higher.
