Please ensure Javascript is enabled for purposes of website accessibility

Why TripAdvisor Stock Was Sliding Again Today

By Jeremy Bowman - Mar 5, 2020 at 1:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the online travel company fell on ongoing concerns about the coronavirus.

What happened

Shares of TripAdvisor (TRIP 0.67%) were heading again today as the travel-recommendation specialist once again got hammered by coronavirus fears. This morning, California declared a state of emergency after it reported its first death from the coronavirus, and Italy said yesterday it would close all of its schools until at least March 15 as part of an effort to contain the spread of the virus in what has been one of the countries most racked by the disease. Both are popular travel destinations.

TripAdvisor was one of many travel stocks to fall today as the sector continued to react to concern about the virus. TripAdvisor stock was down 8.5% as of 11:41 a.m. EST, while the S&P 500 was off 2.1% at that time.

A woman standing on a bridge overlooking a canal in Venice.

Image source: Getty Images.

So what

TripAdvisor makes most of its money by selling ads to travel-related businesses like hotels, restaurants, and tourism-focused activities. Not surprisingly, that kind of business is likely to take a hit when there's a pullback in the overall travel economy. Hotels, for example, are less likely to spend money on advertising if fewer people are looking to book rooms. 

As further evidence that a travel recession is afoot, United Airlines said yesterday that it would cut 10% if its domestic flights and 20% of its international flights next month due to falling demand caused by the coronavirus, and it expects a similar reduction in May. JetBlue also said it would cut capacity by 5% in the near term.  

Now what

TripAdvisor was already struggling before the coronavirus hit as it's made little headway with its bookings platform, and has been challenged by Google, which has made efforts to penetrate the travel industry in recent years. In its February earnings report, which was before the coronavirus outbreak had spread beyond Asia, the company called for adjusted EBITDA growth of at least flat for 2020, and sees revenue continuing to decline in its hotel segment.   

TripAdvisor shares hit an all-time low today, but the search-based company is solidly profitable, and is starting to look cheap with its P/E ratio at just 12 now. Still, considering its lack of growth and the challenges from the coronavirus, that seems like a fair valuation.

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

TripAdvisor, Inc. Stock Quote
TripAdvisor, Inc.
TRIP
$19.45 (0.67%) $0.13

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.