A mixed quarterly earnings report from Tripadvisor (TRIP 5.05%) earlier this week simply wasn't good enough for either the market or analysts following the stock. Although there were elements of that report that were encouraging, expectations were too high and the shares were punished. According to data compiled by S&P Global Market Intelligence, they were down more than 13% in price week to date as of Friday before market open.
Mixed does not mean good for many investors
It wasn't only that Tripadvisor's second quarter was mixed; anemic top-line growth also played a part in the market's bearish reaction. For the period, the company's revenue ticked up only 1% year over year to hit $497 million. The skies were a bit sunnier with non-GAAP (adjusted) net income; this rose by 16% to $57 million ($0.39 per share) for the quarter.
Also, Tripadvisor only edged past the collective ($0.37 per share) analyst estimate for adjusted profitability, while it missed fairly widely on revenue -- the average prognosticator expectation for that line item was more than $505 million.
This inspired a clutch of analysts to cut their price targets on Tripadvisor stock, with one going so far as to downgrade his recommendation on the company.
NASDAQ: TRIP
Key Data Points
Numerous cuts and one downgrade
Among the group of price target cutters were pundits from JPMorgan Chase, UBS, and Goldman Sachs.
More damaging than those reductions was a recommendation downgrade enacted by B. Riley analyst Naved Khan. His new peg on Tripadvisor stock is neutral, from the previous buy, accompanied by a price target cut to $19 per share (from the preceding $26).
In a new research note, Khan particularly expressed concern that "While a slowdown in travel and high competition are presenting headwinds to top-line growth, management's planned investments into initiatives to position the business for sustainable growth will hurt margins in the near term."
