Online travel company TripAdvisor, Inc.’s (TRIP) third-quarter revenue beat Wall Street estimates, but it delivered a negative EPS surprise. According to the company, currency fluctuations, primarily in euros, lowered its revenue growth by 11 percentage points in the last quarter compared to a year earlier. Moreover, higher marketing expenses dragged TRIP’s profitability down.

In its letter to shareholders, TRIP said, “Our results reflect a sustained demand for travel and dining and another quarter of steady progress to full recovery.”

The company recorded its highest-ever quarterly revenue in the third quarter ended September 30, 2022. CEO Matt Goldberg said in the third quarter earnings call, “Travel remains robust, and our internal data suggests that a majority of travelers plan to travel the same or more over the coming months, and many are even willing to spend more.”

The company expects to close out the year with strong travel fundamentals despite the uncertain macroeconomic environment. It expects its consolidated revenue to grow at low single digits as compared to the 2019 levels, implying a modest slowdown from the last quarter.

The company said, “We are optimistic about the long-term opportunities in travel, despite a recovery path that is likely to remain uneven by month and by specific revenue line, and less reliably consistent relative to pre-pandemic.”

The stock has declined 21.7% in price year-to-date and 32.3% over the past year to close the last trading session at $21.33.

Here’s what could influence TRIP’s performance in the upcoming months:

Robust Financials

TRIP’s total revenue increased 51.5% year-over-year to $459 million for the third quarter ended September 30, 2022. Its total adjusted EBITDA increased 59.7% year-over-year to $115 million. The company’s non-GAAP net income increased 78.3% year-over-year to $41 million. Its non-GAAP EPS came in at $0.28, representing an increase of 75% year-over-year.

Favorable Analyst Estimates

Analysts expect TRIP’s EPS for fiscal 2022 and 2023 to increase 313.3% and 110.9% year-over-year to $0.64 and $1.35, respectively. In addition, its revenue for fiscal 2022 and 2023 is expected to increase 64.2% and 15.9% year-over-year to $1.48 billion and $1.72 billion, respectively.

High Profitability

In terms of the trailing-12-month gross profit margin, TRIP’s 92.39% is 83.6% higher than the 50.32% industry average. Likewise, its 27.80% trailing-12-month levered FCF margin is 261.6% higher than the industry average of 7.69%. Furthermore, the stock’s 0.57% trailing-12-month asset turnover ratio is 16.4% higher than the industry average of 0.49%.

POWR Ratings Show Promise

TRIP has an overall rating of B, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. TRIP has an A grade for Quality, consistent with its high profitability.

It has a B grade for Growth, in sync with its robust financials and favorable analyst estimates.

TRIP is ranked #4 out of 58 stocks in the Internet industry. Click here to access TRIP’s Value, Momentum, Stability, and Sentiment ratings.

Bottom Line

TRIP has indicated low single-digit growth in consolidated revenue in the current quarter due to currency fluctuations and an uncertain macroeconomic environment. However, the company remains bullish on its long-term growth prospects. To fuel its long-term growth, the company has embarked on a ‘structured process’ to boost its growth, like revamping its TripAdvisor Plus membership plan.

Given its strong fundamentals, favorable analyst estimates, and high profitability, it could be wise to buy the stock now.

How Does TripAdvisor, Inc. (TRIP) Stack up Against Its Peers?

TRIP has an overall POWR Rating of B, equating to a Buy rating. Check out these other stocks within the Internet industry with a B (Buy) rating: trivago N.V. (TRVG), Travelzoo (TZOO), and Yelp Inc. (YELP).

TRIP shares were trading at $20.40 per share on Wednesday afternoon, down $0.93 (-4.36%). Year-to-date, TRIP has declined -25.17%, versus a -15.65% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

More...