Why TripAdvisor Stock Fell 14.2% in February

What happened

Shares of TripAdvisor (NASDAQ: TRIP) slipped 14.2% in February, according to data from S&P Global Market Intelligence.

Concerns about the novel coronavirus officially known as SARS-CoV-2 hit the market late in the month, and the travel company's stock got caught up in the sell-off despite solid quarterly results a couple of weeks earlier.

TRIP Chart

TRIP data by YCharts.

TripAdvisor reported fourth-quarter quarter results on Feb. 12, delivering sales and earnings results that topped the market's expectations. Revenue tumbled roughly 3% year over year to come in at $335 million, but non-GAAP (adjusted) earnings per share rose roughly 41% to $0.38 and surpassed the average analyst estimate's call for earnings of $0.34. Despite the substantial earnings beat, the spread of the coronavirus dampened the outlook for the travel industry, and TripAdvisor stock slid at the end of the month.

A miniature plane next to a person using a laptop.

Image source: Getty Images.

So what

Mounting fears that COVID-19 will weaken the global economy prompted a week of record sell-offs at the end of February, and companies in the travel and tourism industries were particularly hit hard. TripAdvisor's core business revolves around selling ads to hotels, restaurants, and tourist destinations, and there's a good chance that these businesses will be doing less advertising amid weakened demand. 

Now what

TripAdvisor stock has continued to stumble in March. Shares are down roughly 6% in the month's trading as concerns about the novel coronavirus have continued to weigh on global markets. 

ESTC Chart

ESTC data by YCharts.

With the virus still spreading and many countries implementing travel restrictions or other precautions and some health agencies advising people to avoid large gatherings, it's reasonable to expect that the tourism industry will have a tough year. 

TripAdvisor projected that its EBITDA would be at least flat in 2020 when it held its fourth-quarter conference call in February, but this target seems to have been based on the assumption that the virus wouldn't have much of an impact outside of Asia. With the number of confirmed cases now climbing at an alarming rate across the globe, it's likely that the business will see a greater adverse impact than initially expected. 

The sell-offs in March have pushed TripAdvisor's stock to an all-time low, and shares now trade at roughly 12.5 times expected forward earnings and 1.85 times expected sales.

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 tripled the market.*

David and Tom just revealed what they believe are the ten 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 December 1, 2019


Keith Noonan 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