The Ratings Game: TripAdvisor stock slides more than 7% on profit miss and ‘vague’ guidance

TripAdvisor Inc. shares slid more than 7% Wednesday, as analysts weighed in on a mixed earnings report with the online travel site missing profit estimates for the fourth quarter and offering vague guidance for 2019.

The Needham, Massachussets-based company, which offers hotel, airline and restaurant recommendations and bookings, said it had net income of $7 million, or 5 cents a share, in the quarter, after a loss of $84 million, or 60 cents a share in the year-earlier period. The 2017 number included a tax charge stemming from the tax revamp signed into law in December of that year. Adjusted per-share earnings came to 27 cents, missing the 28 cents FactSet consensus.

Revenue rose 8% to $346 million, ahead of the FactSet consensus of $343 million. But hotel segment revenue fell 2% to $240 million, missing the $247 million FactSet consensus. Average monthly unique hotel shoppers fell 11%.

The company TRIP, -6.48%  said it expects double-digit growth in adjusted EBITDA growth in 2019, which it defines as net income plus provision for income taxes, other income or cost, net; depreciation of property and equipment, including amortization of internal use software and website development; amortization of intangible assets; stock-based compensation and other stock-settled obligations; goodwill, long-lived assets and intangible asset impairments; legal reserves and settlements; and non-recurring expenses and income.

The company is expecting revenue and profit to be weighted to the back half of the first half and full year, due to the timing of certain investments and improvements, the growing seasonality of its portfolio, currency and other factors.

JPMorgan analyst led by Doug Anmuth said the results and guidance were “marginally positive” but the company had a high bar to cross given 2018 stock gains of 57% and another 12% gain in 2019 so far.

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“Hotel segment results didn’t have the upside seen in prior 2018 quarters & the hotel shopper decline was larger than expected,” he wrote in a note. “But strong RPS (revenue per shopper) and adjusted EBITDA growth and non-hotel segment results—non-hotel representing 28% of overall revenue—show that TRIP is improving its platform, remaining disciplined, and diversifying the business. However, we still think top-line visibility remains limited and we continue to look for signs of stronger profitable growth.” JPMorgan rates the stock as neutral.

Guggenheim analyst Jake Fuller said guidance for 2019 “remained vague” and questioned whether it would be well-received by investors. On the company’s earnings call, RBC Capital Markets analyst asked for greater detail on the guidance, noting that double-digit could encompass a wide range of outcomes.

But Chief Financial Officer Ernst Teunissen declined to be drawn.

“In terms of putting more precision on our double-digit EBITDA growth guidance, not putting a finer point on now,” he said, according to a FactSet transcript. “It’s early in the year. We feel comfortable with this level of precision at this point, and as we go forward in the year, we’ll provide more commentary on that.”

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At Stifel, analysts led by Scott Devitt said non-hotel revenue growth of 38% “well exceeded our forecast” of 27% growth.

Devitt noted that click-based and transaction revenue growth turned positive in the quarter, up 1% from the year-earlier period, compared with a 1% decline in the prior quarter. Display and subscription revenue was flat after 12% growth in the year-earlier period, as positive hotel media ad revenue growth was offset by softer trends in other areas such as display advertising.

“We view visibility over the near-to-intermediate term as limited, given the company’s position in the online travel ecosystem and intense competitive landscape, though we continue to look for signs of improvement and further revenue diversification,” he wrote in his investment thesis.

CFRA analyst Tuna Amobi cut his stock price target to $65 from $70, which remains 14% above its current trading level. But he raised his 2019 EPS estimate by 12 cents to $1.91.

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“We see further ratcheted investments in the nascent experiences and attractions (non-hotel) businesses, where TRIP alluded to a potentially sizable market opportunity,” he wrote in a note. CFRA rates the stock at hold.

Shares have gained 43% in the last 12 months, while the S&P 500 SPX, +0.30%  and the Dow Jones Industrial Average DJIA, +0.35%  have gained around 3.5%.

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