On Thursday, Cantor Fitzgerald adjusted its financial outlook for TripAdvisor (NASDAQ: TRIP) shares, reducing the price target from $12.00 to $11.00 while maintaining an Underweight rating on the stock. The firm's decision came after TripAdvisor reported its third-quarter results, which showed revenues and adjusted EBITDA slightly above Wall Street's expectations, according to data from Visible Alpha.
TripAdvisor's third-quarter performance revealed a 12% year-over-year decline in Core TRIP revenues, a steeper drop compared to the 10% decrease observed in the second quarter. Additionally, Viator, a segment of TripAdvisor's business, saw its revenue growth slow down by three percentage points to 10% year-over-year.
The company's fourth-quarter revenue guidance suggests that the Core TRIP segment will continue to experience declines consistent with the third quarter's performance. However, there is an anticipated acceleration in revenue for Viator and The Fork.
Despite these projections, TripAdvisor is expected to face further EBITDA margin deleverage in the fourth quarter, primarily due to a 12 percentage point year-over-year margin compression in its core TRIP segment.
Cantor Fitzgerald's analysis indicates that TripAdvisor's core business is being impacted by a structural deceleration in the Hotel Meta (NASDAQ:META) segment. The firm also noted that TripAdvisor's product initiatives intended to foster growth in Core Hotels are having a limited effect.
The revised price target of $11.00 is based on downward revisions to TripAdvisor's FY25E GAAP EPS estimates, while the target P/E multiple for 2025 remains unchanged at 15x. This adjustment reflects the firm's outlook on the company's profitability and growth challenges going forward.
In other recent news, TripAdvisor Inc (NASDAQ:TRIP). reported third-quarter earnings surpassing analyst expectations, with an adjusted earnings per share of $0.50, notably higher than the analyst consensus of $0.44. However, the company's revenue growth remained flat, with a reported revenue of $532 million, slightly above estimates of $527.72 million but unchanged year-over-year.
TripAdvisor's net income for the quarter was $39 million, and adjusted EBITDA reached $122 million, accounting for 23% of the revenue.
CEO Matt Goldberg expressed satisfaction with the results, which he said represented the diverse categories the company operates in and the segment strategies it is executing. CFO Mike Noonan noted that adjusted EBITDA outpaced expectations due to solid execution from their teams and the timing of certain growth initiatives. Despite the earnings beat, the flat revenue growth seems to have disappointed investors.
In terms of future strategies, TripAdvisor emphasized its focus on executing segment strategies, including a shift to an engagement-led approach for its core brand and pursuing higher-growth opportunities in its Viator and TheFork businesses. The company did not provide specific guidance for upcoming quarters.
InvestingPro Insights
Recent InvestingPro data provides additional context to TripAdvisor's financial situation, offering a more nuanced view of the company's performance amidst the challenges highlighted by Cantor Fitzgerald. Despite the reduced price target, TripAdvisor's financials show some positive indicators. The company boasts impressive gross profit margins of 90.96% for the last twelve months as of Q3 2024, reflecting strong operational efficiency in its core business model.
Moreover, TripAdvisor's revenue for the same period stands at $1.814 billion, with a modest growth of 3.54%. This growth, albeit small, contrasts with the declines noted in the Core TRIP segment, suggesting that other areas of the business may be compensating for the weaknesses in the Hotel Meta segment.
InvestingPro Tips reveal that TripAdvisor holds more cash than debt on its balance sheet, indicating financial stability that could provide a buffer as the company navigates through its current challenges. Additionally, the stock has shown a significant return over the last week, with a 8.54% increase, possibly reflecting market optimism despite the analyst downgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for TripAdvisor, providing a deeper understanding of the company's financial health and market position.
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