TripAdvisor Inc (NASDAQ:TRIP) is tripping all over itself this morning, with TRIP stock down as much as 8% in early trading.
The reason is pretty simple: TripAdvisor earnings were ugly. But beyond the most obvious problems with TRIP stock after this report, the broader story of this travel portal continues to be discouraging for investors and signal these declines are only the beginning.
After all, TRIP stock is down about 25% in the last year vs. a modest gain for the S&P 500. Thus, the TripAdvisor earnings report is more of a symptom of continued problems at the company rather than just a knee-jerk reaction to the latest numbers.
Here’s the full scoop on what’s going on for TRIP stock, and what’s next after the latest TripAdvisor earnings.
TRIP Stock in a Tailspin
The headline numbers from the latest TripAdvisor earnings report tell a pretty brutal story: a 29% slump in Q2 earnings, with profit of $34 million vs. $58 million last year, and a nearly 4% slide in revenue to $391 million on the quarter.
Oh yeah, and both the top and the bottom line missed Wall Street expectations by a serious margin for good measure.
The deeper details are equally ugly. Hotel revenue, which makes up about 80% of sales, was down about 8% compared with last year. At the same time, expenses soared as TRIP stock spent more than 5% more on marketing year-over-year and a big 17% sequentially over the prior quarter.
When sales are weaker and expenses are higher, it’s no wonder the pain in TripAdvisor earnings is severe.
But the worst part of all is that none of this is news.
Competition has been fierce from online travel peers Priceline Group Inc (NASDAQ:PCLN) and Expedia Inc (NASDAQ:EXPE) as well as from upstarts ranging from hotel booking newcomer Trivago to Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) with its Google Flights portal. So, it stands to reason that increased marketing costs and top-line pressure will continue as TRIP stock looks to defend its turf.
TripAdvisor spun off from now-rival Expedia Inc. in 2011, but it’s increasingly clear that one is better suited for the rough-and-tumble competition of online travel than the other. EXPE stock is up 133% in the last three years while TRIP stock is down 12%.
If you really want to play online travel, there are plenty of good options out there.
TRIP is not one of them, and the latest TripAdvisor earnings bear that out. Expect the pain to continue, and look elsewhere to play this trend.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
