Why Did TripAdvisor Stock Drop after 3Q15 Earnings Release?



3Q15 earnings

TripAdvisor (TRIP) is one of the world’s largest online travel research companies. It competes with online travel agency majors such as Priceline (PCLN) and Expedia (EXPE). TRIP missed analyst estimates on both revenue and earnings in 3Q15.

Revenue rose by 17% to $415 million, which was below analyst estimates of $429 million. Earnings per share (or EPS) rose by 10% to 53 cents, missing analyst estimates of 55 cents. TripAdvisor CEO, Steve Kaufer, said that headwinds from TripAdvisor’s launch of its instant booking platform contributed to $10 million of the revenue miss and $8 million of the EBITDA miss.

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Stock movement before and after 3Q15 results

TripAdvisor’s (TRIP) stock has been volatile in 2015. The company’s stock had surged by ~26% earlier in October when the company struck a partnership deal with Priceline (PCLN), under which Booking.com will initially take part in TripAdvisor’s instant booking platform. The company also managed to strike instant booking partnerships with major hotels like Marriott (MAR) in June 2015 and Wyndham Hotel Group (WYN) in October 2015.

However, the company’s stock fell rapidly on its earnings release. The company saw strong growth across key performance indicators but missed analyst estimates. The company’s third quarter performance disappointed its investors as expenses continued to grow with higher advertising spending, discounts, and loyalty programs. The company saw better visitors and strong growth in revenues. However, advertising, selling, and marketing expenses dragged the company’s bottom line down.

The company’s stock was down by about 9% in the pre-market session as investors expected it to fall short of estimates. After its earnings announcement, its stock fell by ~7%. The weakness spread to its peers like Expedia (EXPE), which fell ~3%, and Priceline, which fell ~1%. The broader market, tracked by the SPDR S&P 500 ETF Trust (SPY), remained flat.

Next, let’s look at how TripAdvisor performed across key metrics.


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