Vacation sorted? Did Tripadvisor help? Or you shopping elsewhere?
Key Stats
| Ticker | TRIP |
|---|---|
| Sector | Travel Agents |
| Latest price | $36.10 |
| Value | $5,098M |
| Daily vol | $95M |
| Date | 20 June 2017 |
| Links | Yahoo Finance, SEC Edgar, tripadvisor.com |
1. a dotcom survivor!
Founded in Feb 2000, and still run by the same man, TripAdvisor owns and operates a portfolio of online travel brands and operates through two segments: Hotel and Non-Hotel. And it's a really international business operating in 48 markets / 28 languages.
- The Company's Hotel segment includes click-based advertising and transaction; display-based and subscription-based advertising, and other hotel operations. This division is 80% of sales today, down from 90% two years ago.
- The Non-Hotel segment includes Attractions, Restaurants and Vacation Rentals businesses.
But none if would be possible without the content! They've 465 million reviews on 7 million places to stay, places to eat and things to do, across the globe.
Looking at the numbers & model
They've been two tough years for TRIP, with revenues declining last year at the Hotels unit, and margins under pressure, down to 32% from 42%. In contrast the non-Hotel business is growing fast, but is still loss making. The key issue's been a decline in click/transaction revenue per hotel shopper.
| Metric | 2012A | 2013A | 2014A | 2015A | 2016A |
|---|---|---|---|---|---|
| Revenue | $0.8bn | $0.9bn | $1.2bn | $1.5bn | $1.5bn |
| EPS | $1.37 | $1.41 | $1.55 | $1.36 | $0.83 |
With that in mind it's key to note that their biggest competitors, Expedia and Priceline are also their biggest customers, a combined 46% of sales over the last 3 years.
funny money?
From a capital structure perspective, it's nice to see they've $500m of cash on the books, But given this is a cash cow... why aren't they paying any dividends. Okay they do repurchase stock... but there is a stock option scheme that seems to cancel out the benefit of the buybacks.
Worse... there are 2 classes of shares. And Liberty TripAdvisor, an old John Malone rump, owns 22% of the shares in TRIP but has 56% of the votes. So, if you like TRIP... maybe you should be buying $LTRIP. Why? It's enterprise value is $750m but it's 31m shares in TRIP are worth $1.1bn.
Or is that just to clever, by half?
2. Shop elsewhere?
Priceline's still the industry's bigdaddy capturing the revenues, margin, returns and the market cap! It's as if Expedia and TripAdvisor are there to keep them honest, in the eyes of the hotel industry.
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| Tripadvisor Inc | $1,500M | 17% | 7% |
| Priceline Group Inc | $11,014M | 38% | 22% |
| Expedia Inc | $9,058M | 15% | 7% |
| Ctrip.Com International Ltd (ADR) | $3,100M | 3% | 0% |
| Yelp Inc | $752M | 6% | 1% |
| Travelport Worldwide Ltd | $2,393M | 24% | N/A |
Though it's nice to see that TRIP isn't bottom of the class. China's CTRIP looks like it's "hope" value and Yelp, another user-generated site... looks like a "no-hope" stock. :(
Translating it into valuation, the whole "consumer" sector looks crazy on earnings at 25 to 31x forecasts. Only Travelport a B2B player looks oddly cheap.
| Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | Price to Sales |
|---|---|---|---|---|---|
| TRIP.O | $5,098M | 31x | 6% | 0% | 3x |
| PCLN.O | $90,992M | 25x | 18% | 0% | 9x |
| CTRP.O | $27,674M | 131x | 0% | 0% | 10x |
| EXPE.O | $22,399M | 28x | 21% | 1% | 3x |
| TVPT.K | $1,708M | 10x | 9% | 2% | 2x |
| YELP.K | $2,440M | -ve | n/a | 0% | 3x |
3. Is Wall Street clicking?
With TripAdvisor, the professionals on Wall Street are loving the price, saying it's worth $46, i.e. 28% upside but their recommendation is hold. Go figure.
Perhaps the brokers have been stung the last 2 years. Their target's been slashed steadily from $90 to the current $46. Sales forecasts have yoyo-ed between $1.4 and 1.7bn. But earnings forecasts have been sliding to the current $1.16 a share from $2.23 two years ago.
Seems no one wants to catch the falling knife!
With management missing earnings 10 out of the 12 last quarters, who can blame them.
4. Shop or hop?
I'm going to pass. There weren't any signs that the EPS downgrade cycle has ended at the last quarter. THe valuation is high... as if everyone anchored in the past, not looking forward. And although it's a great service both for consumer and hotels... is it able to capture a lot of industry cashflows... it seems not.
And that's before I even mention Google. They bought Zagat and are creating lots of different review services. They've pushed into the travel segment via Google Flights. If you've not tested it, you should. Once they've conquered flights, can hotels be far behind.
No, $TRIP doesn't get on my shopping list. Even via $LTRIP.
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Disclosure:
I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare is a Chartered Financial Analyst.
Submitted June 20, 2017 at 11:20AM by shane_stockflare http://ift.tt/2sPd9mh
