Why TripAdvisor Inc. Stock Gave Up 26% Last Year

MarketsMotley Fool

What happened

Shares of TripAdvisor Inc. (NASDAQ: TRIP) had another rough flight last year as the travel-recommendation specialist continued to struggle with a stunted pivot to instant booking. Profits fell and revenue growth stalled, as mobile ads have not monetized at the same rate as desktop ads.

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According to data from S&P Global Market Intelligence, the stock finished the year down 26%. As the chart below shows, sharp declines following earnings reports pushed the stock down over the course of the year:

So what

TripAdvisor shares spiked initially to begin the year, rising along with the broader market, but then plunged after the company's fourth-quarter report came out. Shares fell 11% as the company missed estimates on both top and bottom lines, and revenue growth slowed to just 2%. Adjusted earnings per share fell from $0.45 to $0.16 as results in the profitable hotel segment were weak, and the company invested in its new Instant Booking platform. Management expressed optimism, but the rest of the year did not bear that out.

The stock moved slightly higher after revenue growth improved to 6% in the first-quarter report in May, but then fell again over the following weeks. In November, shares plummeted 22% as the company turned in another weak report with especially disappointing guidance; management said, "Recent partner bidding trends and our reallocation of dollars away from online channels with short-term payback will cause click-based and transaction revenue growth to slow further in Q4."

Online travel-agency stocks fell across the board in the most recent quarter, as competition seems to be increasing, and Priceline Group appears to be spending less for advertising on partner sites like Trivago and TripAdvisor.

Now what

TripAdvisor looks like a broken stock story at this point, as shares are down around 70% since their peak in 2014. With the instant-booking platform failing to yield results, monetization problems, and increasing competition, the company seems likely to continue to struggle, especially considering the guidance it offered in the most recent quarter -- management said revenue trends would be challenged into 2018. With that kind of forecast, this year is likely to be another tough one for TripAdvisor.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Priceline Group and TripAdvisor. The Motley Fool recommends Trivago. The Motley Fool has a disclosure policy.