Investors have low expectations heading into TripAdvisor's (NASDAQ:TRIP) third-quarter earnings report. The online travel booking giant's business was struggling even before the pandemic struck and reduced demand across its platform for hotel, dining, and travel experience products.

The ongoing effects of COVID-19 should dominate the Q3 announcement set for Friday, Nov. 6. But investors are hoping to see some signs of improving finances, and a potentially brighter outlook for 2021.

Let's take a closer look.

A man and a woman walking outside a tropical resort

Image source: Getty Images.

Building off a low base

The fiscal second quarter was about as bad as investors were expecting. Plunging demand for hotel and travel activities in April, May, and June pushed sales down by 86% in what management called a "historic" hit to the industry. The impact of COVID-19 was swift, with traffic on TripAdvisor sites diving to just 33% of normal in the month of April.

The good news is that trends began improving quickly from there, with site traffic steadily climbing to 67% of normal by July. The first question investors will be asking in this report is whether that rebound carried through in August and September to bring TripAdvisor back to something approaching its regular business activity. Expectations are low, though, with most analysts who follow the stock projecting a 69% sales drop in Q3.

Financial hits

CEO Steve Kaufer and his team took several aggressive financial steps aimed at protecting the business through what could be a prolonged period of weak sales. Those moves included adding more debt in Q2 and amending its debt agreements to increase flexibility through late 2021. TripAdvisor has also been slashing costs through a restructuring plan -- including by reducing over 40% of the workforce through a mix of temporary and permanent cuts.

We'll get key updates on these initiatives on Thursday, which will likely set the company up for safety even if further outbreaks dampen travel demand well into next year. "We are operating prudently," CFO Ernst Teunissen said back in early August, "and are well prepared for variety of recovery scenarios." This week's report will contain more details about the type of rebound path management is seeing develop today.

Looking ahead

There will be plenty of major variables that Kaufer and his team can point to as reasons to stay cautious about the short-term outlook. Investors shouldn't expect any detailed forecast about the fourth quarter, for example, or an early detailed read on 2021.

Instead, look for management to talk up the types of "green shoots" they highlighted back in August, such as restaurant bookings in recovering markets and travel research for upcoming trips. Recovery in these areas won't mean TripAdvisor will be approaching sales growth anytime soon. But they will show rebounding demand in the travel industry while demonstrating that shoppers are still relying on its platform for reviews, research, and booking opportunities.

Ideally, that progress will leave TripAdvisor in a position to recapture a significant piece of the travel spending niche once that segment of the economy recovers from the hit it has taken from COVID-19 and from recessions currently gripping many major markets around the world.

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