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Why TripAdvisor Stock Was Crashing Today

By Jeremy Bowman - Updated Nov 7, 2019 at 1:57PM

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Third-quarter results were woeful, and the company announced a couple of surprising moves.

What happened

Shares of TripAdvisor (TRIP -1.56%) were losing altitude today after the travel-recommendation specialist missed estimates in its third-quarter earnings report, the latest sign the company continues to struggle to find its footing in a fast-changing travel industry. Separately, in a surprise move, TripAdvisor announced a special dividend of $3.50 a share and said it would form a joint venture with Trip.com (TCOM 1.95%), the Chinese online travel agency formerly known as Ctrip.

The stock was down 19.5% as of 12:19 p.m. EST.

A woman stands in an airport while a plane takes off.

Image source: Getty Images.

So what

TripAdvisor management acknowledged that the quarter was more difficult than expected, as both revenue and profits declined. Revenue fell 7%, or 5% in currency-neutral terms, to $428 million, badly missing estimates at $458.6 million. Like other pure-play travel companies, TripAdvisor is facing aggressive competition from Google. CEO Steve Kaufer said the search giant's pushing its own hotel products in search results has become TripAdvisor's "most significant challenge," siphoning off quality traffic.

Revenue from its hotel segment, which makes up a majority of sales, fell 12%, though it continued to see growth in experiences and dining, where revenue rose 19%.

Operating expenses in the quarter fell as well as the company cut back on sales and marketing, but revenue fell faster, and adjusted earnings per share declined from $0.72 to $0.58. That also missed the analyst consensus at $0.69.

Separately, TripAdvisor announced a special dividend of $3.50 a share, or a yield of about 11%, which will cost about $490 million. Management seems to be making that move to remind investors that the business is still solidly profitable and to give them a reward after the stock has struggled in recent years.

Finally, TripAdvisor will own 40% of its new joint venture with Trip.com, focused on China, though the company said that wouldn't have a significant impact on its operating results.

Now what

TripAdvisor's post-earnings plunge tracks with other travel stocks that have reported earnings this week like Trivago and Expedia, a sign that a number of industry players are suffering from competition from Google and other trends. The stock is now down 43% over the last year. With the business facing multiple challenges and both revenue and profits falling, investors might want to stay away at least until the business stabilizes.

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Stocks Mentioned

Trip.com Group Limited Stock Quote
Trip.com Group Limited
TCOM
$21.39 (1.95%) $0.41
TripAdvisor, Inc. Stock Quote
TripAdvisor, Inc.
TRIP
$24.65 (-1.56%) $0.39
Expedia, Inc. Stock Quote
Expedia, Inc.
EXPE
$124.59 (-1.56%) $-1.98
Trivago Stock Quote
Trivago
TRVG
$1.67 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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