Company Overview: TripAdvisor, Inc. (NASDAQ: TRIP) is an online travel corporation that owns and maintains several travel-related websites. Hotels, Media & Platform, and Experiences & Dining are the company's two segments. On Tripadvisor-branded Websites, the Hotels, Media & Platform division engages in click-based advertising, generally comprising booking links to its travel partners' websites. It also offers subscription-based advertising for hotels, bed, and breakfast (B&B) owners, and other speciality accommodation properties. Consumers can study and book tours, events, and experiences in travel destinations directly through Viator, its dedicated Experiences offering, and on its Tripadvisor-branded Websites and mobile apps, according to the Experiences & Dining section.

TRIP Details

Key Takeaways from Q1FY22 (ended March 31, 2022)

• Growth in Revenue: In Q1FY22, the company's total revenue amounted to USD 262 million, representing a 113.01% increase year-over-year from USD 123 million in Q1FY21, driven by 81.82% YoY growth in Hotels, Media & Platform and 228.57% YoY growth in Experiences and Dining segment.
• Positive Adjusted EBITDA Margin: TRIP reported adjusted EBITDA of USD 27 million for Q1FY22 compared to negative adjusted EBITDA of 26 million, thus representing an EBITDA margin of 0.8% significantly up from -44.7% reported in Q1FY21.
• Growth in Monthly Unique Users: Average monthly unique users on Tripadvisor-branded websites grew by 27% year over year in Q1FY22, reaching around 71% of the comparable period in 2019 (pre-COVID-19 timeframe), compared to approx. 55% of the corresponding period in 2019 in Q1 2021.
• Reduction in Net Losses: The company's net loss reduced to USD 34 million in Q1FY22 from USD 80 million in Q1FY21, representing diluted EPS of USD (0.24) in Q1FY22.

Revenues & Operating Profit Key Highlights; Analysis by Kalkine Group

Recent Developments

• Management Change: TRIP appointed Matt Goldberg as its new Chief Executive Officer on May 4, 2022, following co-founder and long-time CEO Stephen Kaufer. Matt has over 20 years of proven leadership and operational experience in various major media, advertising, and consumer-facing firms. We warmly welcome him to the team and look forward to benefiting from his experience as he guides Tripadvisor through the next phase of its development.
• Easing the Cruise Shopping Experience: On March 16, 2022, Cruise Critic a cruise reviews site and online cruise community launched by The Independent Traveler, Inc. a subsidiary of TRIP had launched a new cruise purchasing tool, just in time for summer vacation planning. By explaining each deal's incentives and extra offers, the new tool helps to simplify the complexity of cruise pricing. It also uses Cruise Critic's new deal algorithm to assign each a "Deal Score" to better appreciate the overall value.

Balance Sheet & Liquidity Position

• Increased Cash Balance: The company exited Q1FY22 with total cash and cash equivalents of USD 781.0 million, relatively higher than USD 723 million at the end of FY21.
• Cashflow from Operations: Operating cash inflow during Q1FY22 increased to USD 86 million from USD (19) million in the prior corresponding period.
• Increase in Debt: TRIP debt has increased to USD 903 billion from USD 898 million at the end of FY21.

Key Metrics: In Q1FY22, TRIP's operating and net margins were 7.6% and 13.0%, compared to 68.3% and 65.0%, reported in Q1FY21 respectively. ROE stood at 4.4% vs. the industry median of -0.1%.

Profitability Metrics; Analysis by Kalkine Group

Top 10 Shareholders: The top 10 shareholders together form around 53.91% of the total shareholding, while the top 4 constitute the maximum holding. Mitac International Corp and Fidelity Management & Research Company LLC hold the maximum stake in the company at 12.97% and 9.74%, respectively, as also highlighted in the chart below: 

Top 10 Shareholders; Analysis by Kalkine Group 

Risk Analysis

• Adverse Impact from COVID-19 Pandemic: TRIP operates in the travel industry, which suffered a huge hit due to the outbreak of the COVID-19 pandemic. Should this declining trend continue, it will impact consumers' discretionary spending on vacation and leisure activities, which in turn could harm the financials of the company.
• Dependence on Limited Number of Travel Partners: TRIP’s two most significant travel partners, Expedia, and Booking (and their subsidiaries) amounted to 25% of total revenue for the year ended December 31, 2020. Suppose any of these critical travel partners were to stop or severely reduce their advertising on our websites. In that case, they could see a significant drop in revenue in a short period, which would substantially impact their business.
• Risk Related to International Operations: TRIP is a global corporation with operations in several jurisdictions both within and outside the United States, which exposes us to additional risks. Many regions have distinct economic conditions, languages, currencies, legislation, regulatory systems, political stability, customer expectations, and internet commerce.

Outlook:

• For Q2FY22, TRIP expects consolidated revenue in the low to mid-90s as a percentage of 2019 and consolidated adjusted EBITDA margin of around 20% of revenue.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

 Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Over the past nine months, TRIP's share price has corrected 27.87%. The stock is currently leaning towards the lower end of its 52-week range of USD 20.25 to USD 44.99. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low-twenties (in percentage terms). We believe that the company is trading at premium with its peer's average, considering its improvement in monthly unique users and positive adjusted EBITDA. We have taken peers like Baidu, Inc. (NASDAQ: BIDU) and Zynga Inc. (NASDAQ: ZNGA). Considering the decent topline performance, growth in adjusted EBITDA margin, reduction in net losses, associated risks, and current valuation. We give a "Buy" recommendation on the stock at the closing price of USD 24.20, down 2.30% as of May 16, 2022.

TRIP Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.

Note 3: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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