Why TripAdvisor Stock Dropped 5% on Monday

What happened

Last week was a bit of a roller coaster for shareholders of travel information website TripAdvisor (NASDAQ: TRIP), which dropped after earnings last Wednesday only to rebound sharply on Thursday. By Friday, Wall Street analysts had had a bit of time to digest the news and come to a firm conclusion on the stock.

They didn't like what they saw.

Four analysts in a row cut their price targets on TripAdvisor shares Friday, sending the stock down once more to close out last week. Today, the momentum continued to drive TripAdvisor lower, and shares ended the day down another 5.4%.

Man in suit trips on stairs next to a caution sign

Image source: Getty Images.

So what

So what's everyone so upset about?

Sales declined 3% year over year in fiscal Q2, although profits grew by a penny a share. Both sales and earnings fell short of analyst expectations. Management insisted that it's still on track "to deliver double-digit consolidated adjusted EBITDA growth this year." However, TripAdvisor warned that its "adjusted EBITDA growth in the second half [will] step down from the 15% growth we delivered in the first half."

So slower sales in Q2, and slowing earnings in H2. Responding to both the results and the guidance, analysts at Barclays Capital, at Cowen & Co., at Credit Suisse, and at DA Davidson all cut their price targets on the stock.  

Now what

With new guidance factored in, analysts have cut their earnings expectations by about 4% for Q3, which is currently under way, while leaving Q4 targets unchanged. This could prove problematic for TripAdvisor.

On one hand, the latest price targets call for TripAdvisor pro forma earnings to decline 4% in Q3 -- not great news, but at least an easier target to hit. On the other hand, analysts want to see TripAdvisor deliver $0.37 per share in Q4 -- 37% growth year over year -- which should be much trickier to accomplish.  

If this current quarter's results contain another guidance warning similar to what we saw in Q2's results last week, TripAdvisor's declines may have only begun.

10 stocks we like better than TripAdvisor
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and TripAdvisor wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of June 1, 2019


Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends TripAdvisor. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More