Tripadvisor Earnings: Experiences Demand Remains Stout, While Metasearch Shows Some Improvement

No-moat Tripadvisor’s TRIP shares traveled 10% higher as third-quarter sales increased 16% versus our 10% estimate. That said, we don’t plan to materially change our $23 fair value estimate, as we expect intense metasearch competition to weigh amid an ominous economic landscape. Its shares remain undervalued, but we see narrow-moat Expedia shares, which trades at a 30%-35% discount to our $178 valuation, as more attractive.

Revenue growth was once again driven by Tripadvisor’s leading experiences division, with its Viator brand posting a 41% sales lift, comfortably above our 30% estimate. Further, Tripadvisor noted Viator bookings were up 33% in the period. As a result, we plan to increase our Viator 2023 revenue growth forecast toward 50% from 40%. Meanwhile, its restaurant division, TheFork, posted revenue growth in line with our 21% forecast. And even its core business, which faces intense metasearch competition from wide-moat Alphabet, saw revenue growth of 2% versus our estimate for a 3% decline. Within this core business the branded hotel segment results were mixed to positive, as sales improved to 92% of 2019′s level versus 83% last quarter but lagged the 113% recovery for U.S. hotel industry revenue per available room. Still, we are encouraged that innovations, like the company’s Trips itinerary product and AI, are yielding early retention and sales results. Overall, our 2023 total sales growth should move to around 19% from 15% previously on stronger experience business, largely offset by 2024 sales growth moving toward 5% from 7% on slower economic growth. EBITDA margin was 24%, in line with our forecast and down from 25% last year, as the company continues to prudently spend into Viator.

We plan to adjust our Morningstar Uncertainty Rating on Tripadvisor to High from Very High based on our quantitative model, to bring it in line with its peer set and due to emerging signs of improvement in its metasearch business.