Tripadvisor's Shares Down 20% on Questionable Elevated Investments and Moderating Demand

Tripadvisor reported solid third-quarter sales at 107% of 2019’s level versus our 103% forecast and 99% last quarter, with year-to-date EBITDA margins of 22% tracking directly in line with our forecast for the year. But shares dropped around 20% because fourth-quarter sales are targeted to reach a low-single-digit percentage above precoronavirus levels which, while above our mid-90% forecast, represents a moderation from third-quarter levels, and EBITDA margin for the quarter was guided at just 10% on higher marketing spending. While we will be increasing our 2022 sales growth estimate slightly, this will be more than offset by higher costs, reducing our $35 valuation by around 10%. We plan to reduce our 2022 EBITDA margin to 19% from 22%, and our 2023-31 average margin to 27% from 29%. We expect discounted shares to remain volatile until management clarifies plans for its core business next year.