Tripadvisor Earnings: Marketing Leverage Impressive, but Metasearch Still Faces Intense Competition

Tripadvisor shares were 9% higher on Feb. 15, driven by fourth-quarter 2023 sales growth of 10% (compared with our 6% estimate) and EBITDA of $84 million ($63 million), resulting in a 22% margin versus 12% a year ago. We are impressed that Tripadvisor’s marketing as a percentage of sales leveraged 890 basis points to 45.9% in the quarter, leaving the full-year metric at 52.6%, near the 52.5% in 2022 and beat our 54.7% forecast. Tripadvisor is finding early success in utilizing artificial intelligence and data for its 3 billion profiles to drive advertising efficiencies. We plan to reduce our 2024-25 marketing as a percentage of sales estimates to around 52% from just over 54% on average, resulting in about a $1 per-share increase to our $24 fair value estimate. We now see shares as overvalued, up around 25% in the week, off the back of fourth-quarter results and a potential sale of the company.