TripAdvisor (TRIP – Analyst Report) is one of my favorite sites to go to in order to get some ideas on top hotels, activities, and restaurants in a new city I am visiting. The site is a go-to thanks to tons of reviews on any number of topics and it has become a focal point for those in the hotel/vacation industry too.
And while you have to appreciate their business model which relies on users to generate the vast majority of the content, investors need to focus on growth for a small upstart company like TripAdvisor. Unfortunately though, growth really hasn’t been up to par and there are definitely concerns building over TRIP to live up to expectations. These worries were on full display in the most recent earnings report though, and this could set the stage for TRIP stock to close out 2015.
Recent Earnings Report & Outlook
For the most recent quarter, TRIP missed the Zacks Consensus Estimate by posting EPS of just 45 cents a share instead of the 47 cent per share estimate (note these are adjusted earnings which exclude one-time items but include stock-based compensation expenses). The company also missed on the top line, posting sales of $415 million compared to a $430 million estimate, though growth was solid from a year-over-year look.
Still, this inability to live up to estimates and growing competition from a number of travel site competitors has caused many analysts to ratchet down their expectations for TRIP’s earnings both in this current quarter and in the current year.
The magnitude of these revisions has also been pretty significant as the current year consensus estimate has declined by about 7.4% since the earnings report, while this quarter’s consensus estimate has fallen by about 28% in the same time frame. These huge estimate cuts give us no choice but to put TRIP as a Zacks Rank #5 (Strong Sell), meaning we should look for more underperformance from this security in the near term and that other choices might be better plays right now.
If you are looking for another travel-oriented choice in the internet world, Travelport Worldwide (TVPT – Snapshot Report) could be worth closer inspection. This is really more of a tech-focused play on the space, but the company currently has a Zacks Rank #1 (Strong Buy) and a Value Score of ‘A’ to boot.
So if you are looking for an interesting travel stock heading into the holidays, skip TRIP and give Travelport a closer look. Not only does it have a far better value score, but it is expected to see EPS growth north of 200% this year, making it an excellent choice for both growth and value investors going into 2016.
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