After growing 20% over the past six months, at the current price of approximately $23 per share, we believe shares of Tripadvisor (NASDAQ
It is worth noting that a 58% year-over-year (yoy) increase in sales and marketing expenses and an increase in headcount to support growth weighed on Q3 profitability. For the fourth quarter, management expects a modest decline in Tripadvisor core revenue as a percentage of 2019 compared to the third quarter. This pullback is not related to a change in revenue trends, but to a particularly strong August in Q3 2022 and unique items in Q4 2019 creating a more difficult revenue comparison. Please note that in 2019, television advertising for the Tripadvisor brand and other spend was significantly higher in Q3 than in Q4, creating a sequentially more difficult comparison also from an adjusted EBITDA margin perspective, in addition to the impact of the revenue reduction. The company also expects significant foreign exchange impact in the fourth quarter, amounting to approximately $34 million headwinds. That said, while consolidated sales are expected to grow low-single digits from 2019, a modest slowdown from the third quarter of 2022 is also expected.
We’ve revised Tripadvisor’s rating to $21 per share, based on expected earnings per share of $0.67 and a 30.9x P/E multiple for fiscal year 2022 – nearly 8% lower than the current market price. We predict Tripadvisor revenue to $1.5 billion for fiscal year 2022, up 64% yoy.
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