On Thursday, TD Cowen adjusted its outlook on TripAdvisor (NASDAQ:TRIP) shares, reducing the price target to $15 from the previous $25 while maintaining a Hold rating on the stock.
The firm's analysis pointed to a disappointing performance in the second quarter of the year, with core revenue declining by 10% year-over-year, a steeper drop compared to the 2% decrease in the first quarter. Additionally, growth in gross booking value for Viator, a TripAdvisor company, slowed to 8% in the second quarter from 15% in the previous quarter, and further deceleration is anticipated in the third quarter to date.
The firm noted that although TripAdvisor's overall margins improved in the first half of the year, they are expected to decline significantly in the second half. As a result, the firm has revised its projections for TripAdvisor's revenue and EBITDA in the year 2024 to an increase of 1% and a decrease of 4%, respectively. Similarly, the projections for 2025 show no growth in revenue and a 4% decline in EBITDA.
The revised $15 price target for 2025 is based on a sum-of-parts valuation method, which values TripAdvisor's core business at 6 times its projected earnings, while Viator and The Fork, another TripAdvisor company, are valued at 1 times revenue and 2 times revenue, respectively. This adjustment reflects the firm's view that the deteriorating core business outweighs the improving margins at Viator and The Fork.
The firm's analysis suggests that the challenges faced by TripAdvisor's core business are significant, despite the gains made by its subsidiaries. The updated financial projections and valuation reflect a cautious stance on the company's near-term prospects.
In other recent news, Tripadvisor Inc., the renowned online travel platform, reported a modest 1% year-over-year increase in Q2 revenue, reaching $497 million, and an adjusted EBITDA of $97 million. Despite a 10% decline in Brand Tripadvisor revenue due to weaker hotel meta and experiences demand, Viator and TheFork registered revenue growth of 13% and 11% respectively.
The company also disclosed its plan to focus on app-based and logged-in members, optimize marketing, and potentially introduce a rewards program.
Additionally, Tripadvisor repurchased 1.4 million shares at an average price of $18.28, spending approximately $25 million. However, the company's outlook for Q3 predicts flat to slightly down revenue growth, with a decrease in adjusted EBITDA margins. The full-year revenue is expected to grow in the low single digits, with declines in Brand Tripadvisor but improved profitability in Viator and TheFork.
These are some of the recent developments in the company.
InvestingPro Insights
Amid the cautious stance outlined by TD Cowen, recent data from InvestingPro provides a more nuanced picture of TripAdvisor's financial health. With a market capitalization of $2 billion, the company is positioned in the market with a certain weight. Notably, TripAdvisor's gross profit margin impressively stands at 91.18% for the last twelve months as of Q2 2024, highlighting the company's ability to retain a significant portion of its revenue as gross profit.
Furthermore, the InvestingPro data reveals that TripAdvisor's revenue growth was 8.16% over the last twelve months as of Q2 2024, which, while moderate, indicates the company is still expanding its top line. This aligns with one of the InvestingPro Tips, which suggests that net income is expected to grow this year. Additionally, TripAdvisor holds more cash than debt on its balance sheet, providing a cushion for operational flexibility and potential investments.
Investors considering TripAdvisor's stock will find additional insights on the platform, including a total of 12 InvestingPro Tips that provide a deeper analysis of the company's financials and market position. For instance, the platform notes that analysts predict the company will be profitable this year, a critical factor for potential investors. The InvestingPro product offers a comprehensive set of tips for those looking to make an informed decision on the stock.
While TripAdvisor's stock has faced challenges, with a 6-month price total return of -46.67% as of the current date in 2024, the InvestingPro Fair Value estimation stands at $19.07, suggesting potential upside from the previous close price of $14.4. This difference indicates that, according to InvestingPro's analysis, the stock may be undervalued at its current trading price.
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