) have been buoyant since spinning off from Expedia Inc. (
) late last year. However, this Zacks #2 Rank (Buy), which
advertises various travel offerings (hotels, cruises, flights,
etc.), has gained further momentum since filing its first annual
report on March 15, 2012.
Being an aggregator of user reviews and opinions related to travel,
the company's database includes over 60 million reviews from over
20 million members. TripAdvisor is a global company, with 1,300
employees spread across the U.S. and 29 other countries.
Q1 Results Blasted Estimates
TripAdvisor's first quarter results (reported May 1) were very
strong, with revenue and adjusted earnings growing 33.3% and 79.5%,
respectively, on a sequential basis. They were also up 23.1% and
3.6%, respectively, from the year-ago quarter. Adjusted earnings
were 23.3% higher than the Zacks Consensus Estimate of 30 cents.
TripAdvisor's main business remains click-based advertising, which
grew a healthy 20% from last year and accounted for 79% of
quarterly revenue. Display-based advertising, which fetched another
12%, was also up double-digits. Most encouraging was the
subscription segment, which accounted for the rest and jumped 67%.
Subscriptions bring predictability to results, so this could be an
encouraging trend for the future.
The revenue growth from the prior year is indicative of good
monetization. Also, the significant investment in the business
(which muted earnings growth with respect to the prior year)
enabled the company to increase focus on specific growth areas,
such as mobile and Facebook integration.
Mobile numbers were particularly impressive (17 million mobile app
downloads, 23 million unique visitors per month to tripadvisor.com
through mobile devices, page views on mobile devices up more than
250% and tablet page views up more than 300%).
Facebook integration also remains on track with the company's trip
planning for Facebook users touching 120 million (up 34% from the
2012 Guidance Was Raised
TripAdvisor currently expects 2012 revenue to be slightly higher
than the mid-point of the previous range (up mid-to-high teens
percentage rate). Subscription revenue is expected to grow in the
high double-digits, with display coming in roughly flat with 2011.
EBITDA is expected to be slightly higher than in 2011.
Following the strong results and raised guidance, the Zacks
Consensus Estimate for 2012 and 2013 jumped 10 cents (8.3%) and 15
cents (10.3%), respectively, over the past month.
TripAdvisor Deserves a Premium Valuation
Since both the company and the sector are in the growth phase, it
is understandable that there would be significant investment in the
business. Therefore, earnings/earnings growth may not be the best
way to arrive at a fair value for either TripAdvisor, or HomeAway (
). While Orbitz Worldwide (
) has been around for a while, it continues to run at a loss.
TripAdvisor is the only one currently running at a profit.
Therefore, P/S appears to be the best valuation metric and
TripAdvisor is trading at a slight premium to AWW in this respect,
while both these companies are at a significant premium to both
Orbitz and the industry. Given its growth potential, there appears
to be room for further appreciation.
TRIP shares are up 69.0% year to date compared to a mere 3.2%
increase for the S&P 500. The strength in share prices is
mainly on account of its solid performance since inception, which
differs greatly from other companies going public, such as Facebook
) and Groupon (
The fact that investors were already aware of its potential, when
it was a part of Expedia also helped (Expedia reported and
discussed TripAdvisor revenues and potential separately).
TRIP has also outdone its peers AWAY and OWW, which were up 2.7%
and down 15.7%, respectively during the same period.
Trading volumes are also considerably higher for TRIP than its
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