Tripping Over TripAdvisor: Demystifying 'Disruptive Technology' In Online Travel
Jung-Yung Jonathan Chang
Jung-Yung Jonathan Chang
Wed, Jan. 27, 9:58 AM
- Believing the environment for online travel firms is "becoming less favorable," Goldman's Heath Terry has downgraded TripAdvisor (TRIP -2.1%) to Sell ahead of the company's Feb. 11 Q4 report, and cut his target by $9 to $59.
- Terry, who has also downgraded Priceline (NASDAQ:PCLN) to Neutral, argues high hotel occupancy and average daily rates serve to "crowd out leisure travelers," that rising online booking penetration rates leave less room for share gains, and that competition is growing from alternative accommodation providers (read: Airbnb) and traditional traffic sources (e.g. Google).
- Regarding TripAdvisor in particular, Terry is worried about valuation, slowing revenue growth, and near-term monetization headwinds caused by Instant Booking adoption. "While we believe a cost per acquisition based model like [Instant Booking] has the potential to generate incremental revenue for TripAdvisor over time, the lack of broad coverage, terms negotiated during a period of unprecedented supplier leverage, and conversion rate challenges from the dual track results consumers are presented with are likely to drive slowing revenue growth in the interim ... That said, we believe as a traffic asset TripAdvisor could be an attractive M&A target to larger OTAs."
- Yesterday: TripAdvisor strikes Instant Booking deal with Starwood
Tue, Jan. 26, 12:25 PM
- TripAdvisor (TRIP -0.1%) has added hotel giant Starwood (about to be acquired by Marriott) to the list of firms supporting its Instant Booking platform, which allows bookings to be made without leaving TripAdvisor's site/apps.
- The deal follows 2015 Instant Bookings agreements with Marriott and Priceline. Starwood has 1,270+ properties in ~100 countries under high-end brands such as Sheraton, W, Westin, and St. Regis.
- Piper's Michael Olson (Overweight rating, $120 target) isn't surprised by the Starwood deal, given the pending Marriott acquisition. He nonetheless calls the deal a positive, and declares TripAdvisor is making "tremendous strides" in building its supplier network.
- TripAdvisor's Q4 report arrives on the morning of Feb. 11. In November, the company stated on its Q3 earnings call Instant Booking adoption was pushing out revenue recognition relative to traditional booking referral payments.
Wed, Jan. 20, 1:18 PM
- Like clockwork, high-beta tech stocks continue selling off at a feverish pace as markets nosedive. Today's selloff comes with the Nasdaq down 2.7%, and the S&P 3%. Margin calls are likely a contributing factor.
- Solar stocks, which sold off yesterday even as major indices moved little, are underperforming again as energy stocks get routed once more and oil drops below $27/barrel. Hard-luck SunEdison (SUNE -13.6%) is now close to $2. Also tumbling: Canadian Solar (CSIQ -8.8%), ReneSola (SOL -8.2%), and Yingli (YGE -6.9%).
- Security tech plays FireEye (FEYE -9.3%), Palo Alto Networks (PANW -6.1%), Rapid7 (RPD -11.6%), and Vasco (VDSI -10.5%) aren't faring better - peers Fortinet and Barrcauda were downgraded this morning. Nor are Splunk (SPLK -7.7%) and Tableau (DATA -7.2%), two firms often hyped as big data/analytics plays, or Russian tech firms Yandex (YNDX -6.6%) and Qiwi (QIWI -6.9%), which often sell off when oil prices and the ruble are under pressure.
- Elsewhere in tech, big decliners include Zillow (Z -7.1%), Square (SQ -6.7%), Fitbit (FIT -6.6%), Groupon (GRPN -6.9%), TrueCar (TRUE -7.7%), Pure Storage (PSTG -7.8%), Jive Software (JIVE -7.4%), Shopify (SHOP -7.2%), Ruckus Wireless (RKUS -8%), Renren (RENN -6.8%), Infinera (INFN -6.1%), TripAdvisor (TRIP -6.5%), Ellie Mae (ELLI -6.7%), and Knowles (KN -6.2%).
- Also off sharply: Several large-cap tech stocks, TowerJazz, Synaptics, Adtran
Wed, Jan. 13, 2:59 PM
- It's another ugly day for stocks, with the S&P down 2.1% and the Nasdaq 2.9%. Many high-beta tech names are naturally seeing even steeper declines.
- Major decliners include driver-assistance hardware/software provider Mobileye (MBLY -6.4%), travel reviews/bookings search site TripAdvisor (TRIP -5.8%), mobile payments provider/recent IPO Square (SQ -7%), online furniture leader Wayfair (W -6.2%), craft/vintage goods marketplace Etsy (ETSY -7.2%), SMB Web services provider Wix.com (WIX -7.9%), and CAD/CAM software leader Autodesk (ADSK -7.7%).
- Others include gaming headset vendor local reviews leader Yelp (YELP -6%), Turtle Beach (HEAR -19.5%), wireless charging tech developer Energous (WATT -14.2%), cloud HR software firm Paylocity (PCTY -7.3%), e-commerce software/services firm Shopify (SHOP -8.9%), e-commerce services firm ChannelAdvisor (ECOM -8.5%), mainframe/IT services provider Unisys (UIS -7%), and car-buying site TrueCar (TRUE -6.7%).
- Previously covered: Qorvo, Cimpress, Tableau, Multi-Fineline, LendingTree, Twitter
Nov. 24, 2015, 11:15 AM
- Priceline (PCLN -3.4%), Expedia (EXPE -3.5%), and TripAdvisor (TRIP -2.9%) are under pressure after the State Department (citing fears more attacks are planned) issued a global travel alert for Americans in the wake of the Paris attacks. The Nasdaq is down 0.8%.
- The alert doesn't call on Americans to avoid traveling, but does urge them to "exercise vigilance when in public places or using transportation."
- Of the three companies, Priceline has the most international exposure: 88% of its Q3 bookings came from non-U.S. markets, with a large chunk coming from Europe via the company's Booking.com unit.
- Expedia received 46% of its Q3 revenue from outside the U.S.. TripAdvisor got 47% of its Q3 revenue from outside North America.
Nov. 6, 2015, 1:32 PM
- Priceline (PCLN -1.6%) and Expedia (EXPE -2.9%) have sold off after TripAdvisor (TRIP -6.8%) posted a Q3 miss and cut its full-year revenue growth forecast. On its earnings call (transcript), TripAdvisor stated the rollout of Instant Booking (allows bookings to be made on TripAdvisor's site/apps, Priceline recently signed up) is affecting near-term revenue by pushing out revenue recognition relative to referral (click-based) payments.
- Also: Priceline says it's uninterested in making a rival bid for top vacation rental marketplace HomeAway (AWAY -6.2%), which recently agreed to a $3.9B sale to Expedia. HomeAway has fallen to $37.73, a price close to what Expedia's cash/stock offer is currently worth.
- TripAdvisor's management faced earnings call questions about the impact of Instant Booking on monetization and conversion rates. It insisted IB, and the the Priceline deal in particular, will be a major positive. "The reason Priceline enables us to accelerate our [Instant Booking] rollout globally is because of the rich content that they have on 400,000 plus properties all around the globe, and by that I mean they are able to successfully take bookings on 400,000 plus properties in multiple, multiple, different language, processing payments for multiple different credit card by multiple different banks."
- At the same time, management is taking a cautious approach to modeling international IB sales. "[W]hile we have the decent amount of experience now in U.S. and U.K., we don't quite know how [Instant Booking] is going to flowing in, in France, in Japan, all throughout age, all throughout all the other markets that we look to roll it out in."
- Oppenheimer's Jed Kelly has downgraded TripAdvisor to Perform, citing slightly weaker hotel trends and the "monetization drag" Instant Booking could have in the near-term. Nonetheless, he thinks the Priceline deal "should eventually enhance earnings long term, especially as revenue leakage and improving mobile monetization eventually equates to higher revenue per hotel shopper."
- Priceline and TripAdvisor rallied last week in response to Expedia's Q3 results and full-year guidance hike. Priceline reports on Monday morning.
Nov. 6, 2015, 9:29 AM
Nov. 5, 2015, 7:22 PM
- With a Q3 miss on the books, TripAdvisor (NASDAQ:TRIP) guided on its earnings call for high-teens 2015 revenue growth. That's below prior guidance for low-to-mid 20s growth (which itself was down from a previous outlook for high-20s growth), and below a 23.7% consensus.
- Business unit performance: Click-based ad revenue (metasearch) rose only 6% Y/Y in Q3 (14% exc. forex) to $261M, down from Q2's 13% growth and Q1's 20%. Display ad revenue rose 20% to $42M; subscription, transaction, & other revenue rose 56% to $112M.
- Regional performance: North American revenue rose 24% to $219M, EMEA 13% to $135M, and Latin America 13% to $18M. Asia-Pac was flat at $43M. Overall, forex had an 8% impact on revenue growth (17% vs. 25%).
- Financials/traffic: GAAP costs/expenses rose 21% Y/Y to $327M, with $197M spent on sales/marketing. Monthly unique visitors rose 23% Y/Y to 350M, registered members rose 33% Y/Y, and cumulative mobile app downloads rose by 15M Q/Q to 230M. TripAdvisor ended Q3 with $730M in cash, and $288M in debt.
- Shares have fallen to $75.99 after hours. Macquarie's pre-earnings downgrade appears well-timed.
- Q3 results, PR, slides (.pdf)
Nov. 5, 2015, 4:06 PM
- TripAdvisor (NASDAQ:TRIP): Q3 EPS of $0.53 misses by $0.02.
- Revenue of $415M (+17.2% Y/Y) misses by $15.23M.
- Shares -4%.
Nov. 4, 2015, 5:35 PM
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Oct. 30, 2015, 1:57 PM
- TripAdvisor (TRIP +4.6%) has joined Priceline (previously covered) in getting a lift after Expedia (EXPE +9.3%) reported a 21% Y/Y increase in gross bookings to $15.4B, aided by a 36% increase in hotel room nights and a 31% increase in air tickets sold.
- Also: On its earnings call (transcript), Expedia hiked its full-year adjusted EBITDA growth forecast (exc. eLong) to 12%-15% from 10%-15%. Excluding recently-acquired Orbitz, growth is expected to be at the high end of the range. Including Orbitz, it's expected to be at the low end.
- CEO Dara Khosrowshahi estimates Orbitz would have delivered 2015 adjusted EBITDA of $135M on a standalone basis, below Street expectations. However, he added Expedia now thinks there's "meaningful upside" to a prior target for $75M/year in acquisition-related synergies.
- Khosrowshahi also insisted Expedia still has a long growth runway - "Keep in mind that we're still just a single-digit percentage of total room nights in the U.S." - and downplayed fears of competition from fast-growing Aribnb (Pending:AIRB), albeit while admitting Airbnb could "put pricing pressure in certain markets where you see a significant amount of Airbnb inventory." CFO Mark Okerstrom forecast hotel margin pressure will continue through 2016, but ease towards the end of the year.
- Benchmark, RBC, and Cantor have hiked their Expedia targets. Shares have made fresh highs. TripAdvisor, stung on Tuesday by a Macquarie downgrade, reports on Nov. 5.
Oct. 27, 2015, 12:49 PM
- Stating he's "incrementally cautious on 2016 monetization," Macquarie's Tom White has downgraded TripAdvisor (TRIP -3.1%) to Neutral ahead of its Nov. 5 Q3 report, and cut his target by $2 to $84.
- White thinks TripAdvisor will soon face tougher traffic/hotel shopper growth comps, believes the company may be accepting lower near-term monetization/take rates for Instant Bookings (relative to traditional referral fees) in order to grow the platform, and could make fresh investments in fields such as promoting Instant Booking.
- White: “This is the correct strategy for the long-term health and defensibility of TRIP’s business, in our view, due to its potential to diversify TRIP’s revenue sources over time. However, we believe the transition may limit revenue upside in ‘16; we’re modeling Click-based [revenue] growth of 17% next year and total [revenue] growth of 20% (vs. [consensus]. at +20.5% and +21.7%, [respectively]).”
- TripAdvisor soared two weeks ago after announcing an Instant Booking deal with Priceline. Deals have also been struck with Marriott and Wyndham.
Oct. 14, 2015, 12:46 PM
Oct. 14, 2015, 9:42 AM
- Certain Priceline (PCLN +0.2%) travel brands will support TripAdvisor's (NASDAQ:TRIP) Instant Booking solution, which allows users to make bookings without leaving TripAdvisor's site/apps.
- Development work has already begun to integrate Priceline hotel properties with Instant Booking, which will be supported by Priceline's Booking.com unit (dominant in Europe). The Priceline.com and Agoda.com brands are "likely" to support Instant Booking in time.
- Expedia (NASDAQ:EXPE) has sold off on the news. Morgan Stanley views the deal as a negative for Expedia, noting it gets 9% of its business via TripAdvisor.
- 235K properties are currently available via Instant Booking; a deal with Marriott was struck in June. Priceline (along with Expedia) had previously boycotted Instant Booking even as it supported similar features on other apps, a move seen as highlighting the tension that existed between the platforms.
- Update (12:23PM ET): Regarding Priceline's prior stance towards Instant Booking, a Priceline VP tells Seeking Alpha the company had never said it would "never" support Instant Booking, unlike Expedia. Meanwhile, RBC's Mark Mahaney calls the deal a "big win for TRIP, a small positive for PCLN and a slight negative for EXPE."
Oct. 14, 2015, 9:13 AM
Oct. 8, 2015, 5:39 PM
- Ernst Teuniseen, until now the CFO of printing service provider Cimpress (NASDAQ:CMPR), has been named TripAdvisor's (NASDAQ:TRIP) CFO, effective Nov. 9. His hiring comes 6 months after TripAdvisor announced Julie Bradley is stepping down as CFO.
- Cimpress has named Sean Quinn, previously its accounting and corporate finance chief, its next CFO.