What happened
Shares of TripAdvisor (TRIP 5.05%) were moving higher today as the travel-recommendation specialist benefited from tailwinds in the broad market today after the company announced yesterday that it would lay off about 25% of its staff, or more than 900 employees, helping to cut costs during a difficult time.
As of 12:33 p.m. EDT, the stock was up 5.8% while the S&P 500 had gained 2.8%.
Image source: Getty Images.
So what
A number of factors seemed to be pushing TripAdvisor shares higher today. First, stocks rose as earnings reports from a number of companies helped assuage fears about the crisis and as Gilead, the maker of the anti-viral drug remdesivir, said that a trial for the drug showed positive results, eliciting cheers from the market.
TripAdvisor may also have gotten a tailwind from Alphabet's earnings report as the search giant surged on results that were better than feared and as it reassured investors that it would recover as the global economy bounced back. Since TripAdvisor is also an advertising-based business, investors may have extrapolated that news favorably for the travel stock.
Finally, yesterday's blog post from CEO Steve Kaufer showed the severity of the challenges the company is facing, but it also may have given hope that the streamlined company will emerge from the crisis more profitable.
Now what
There's no question that the travel sector has been battered by the coronavirus pandemic as people around the world are staying at home in order to stop the spread of the virus, meaning revenue for airlines, hotels, casinos and other travel-related businesses has dried up.
The next few months will certainly be difficult for TripAdvisor as the travel industry won't recover until it's safe to travel again, and even at that point, a global recession could continue to hamper travel spending. And TripAdvisor wouldn't have made those layoffs if it didn't anticipate more pain ahead.
We'll learn more when the company reports first-quarter earnings, which is expected next week. Analysts expect revenue to decline 13.8% to $324.2 million, and for adjusted earnings per share to slip from $0.36 to $0.24, but investors will also be keen to hear what management thinks about the recovery and when to expect it.
