$TRIP’s Wild Ride
Tripadvisor investors endured a bumpy ride after yesterday’s close.
Shares of the online travel planner tumbled 6% in after-hours trading following the company’s quarterly earnings release, only to recover all the losses during the conference call.
Feb. 11 at 10:01 PM
Feb. 11 at 6:18 PM
Margin concerns seemed to spark the early sell-off. $TRIP’s fourth quarter EPS of $0.21, excluding stock-based compensation and other items, met Wall Street consensus opinion, according to the Analyst Ratings Network. Quarterly revenues beat expectations, rising 26% yoy to $212.7 Million.
However, profit fell eight cents from the same period a year ago as margins contracted. The company said margins fell from 38% in the last three months of 2012 to 25% in the fourth quarter of 2013.
On the earnings call, the company allayed fears for long-term profitability by clarifying the potential upside to the “short term” margin hit. CEO Stephen Kaufer said that $TRIP is investing to break into China, which has more outbound travelers than any other country. $TRIP is also spending on different forms of advertising aimed at expanding the site’s reach to travelers who are not regular Tripadvisor users.
“We are willing to invest up to a zero incremental profit margin in order to expand our reach and increase what we call trial of our site,” Kaufer said during the call. “Viewed to our long-term growth lens, we will always reinvest profit when we can efficiently grow our community and our top line. Similarly, I will remind everyone that we do not manage the business to a specific margin target. Therefore, should an investment opportunity emerge through 2014 to enhance our long-term growth prospects, we will likely take that option, even if it comes with a short-term impact to our bottom line.”
Feb. 11 at 5:57 PM
The conference call convinced many investors to snap up the stock at a discount.
Feb. 11 at 5:23 PM
Some investors are certain that $TRIP’s revenue beat will push all travel stocks higher tomorrow.
Feb. 11 at 5:02 PM
Online travel stocks have already soared to high valuations. Expedia, $EXPE, rose 14% after fourth quarter earnings soundly beat Wall Street estimates last week. The travel company’s market cap is nearly 45X its trailing twelve month earnings. $Trip’s market cap is nearly 56X trailing twelve month earnings. For comparison, $GOOG’s trailing twelve month P/E ratio is 31.
Priceline, $PCLN, is expected to report earnings on Feb. 20.
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