TripAdvisor Stock Rose 15%, Q3 Earnings Crushed the Estimates



Stock soared

On November 8, TripAdvisor (TRIP) stock rose more than 15%. The company announced its third-quarter earnings on November 7 after the market closed. The company’s third-quarter non-GAAP EPS rose two-fold to $0.72 and handily beat analysts’ estimate of $0.48. However, the revenues of $458 million fell short of the forecast and registered 4% growth YoY (year-over-year).

TripAdvisor is benefiting from improving world economies—mainly the US economy, a healthy job environment, and a steady rise in wages. The company’s strong efforts toward improving the user base through marketing initiatives and continuously enhancing its mobile-centric product design have been attracting new users.

TripAdvisor’s recent results marked the third consecutive quarter with consistent and strong bottom-line growth. The company was lagging until last year. The company beat analysts’ earnings estimates in all three quarters in 2018 and marked a significant YoY improvement.

Investors are more confident about the TripAdvisor’s business model, which is reflected in its YTD (year-to-date) share price performance. The stock has rallied 94.2% YTD and significantly outperformed the SPDR S&P 500 ETF’s (SPY) returns. SPY has gained 5.1% during the same period.

The company has outperformed its top peers’ returns. Booking Holdings (BKNG) and Expedia (EXPE) shares have gained 13.8% and 4.7% YTD, respectively. Ctrip.com International (CTRP) has lost 36.8% of its value during the same period.

Analysts’ improved target price

Recently, TripAdvisor reported overwhelming bottom-line results, which instilled confidence in the stock. There have been six upward target price revisions after TripAdvisor’s third-quarter announcement.

On November 7, Cowen and Company increased its target price to $52.00 from $47.00. RBC Capital raised its target price to $66.00 from $50.00 on November 8. D.A. Davidson increased its target price to $62.00 from $53.00. Ascendiant Capital raised its target price to $77.00 from $56.00. Barclays increased its target price to $78.00 from $68.00, while Credit Suisse increased its target price to $63.00 from $51.00. As a result, the consensus target price increased. As of November 8, the consensus target price was $53.83—up 11.2% from the target price of $48.43 on November 7.

In this series, we’ll analyze TripAdvisor’s third-quarter performance. We’ll also analyze the key metric trends and analysts’ estimates for the company’s fourth-quarter performance. Finally, we’ll take a look at what TripAdvisor’s valuation multiples could mean for investors.

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