Why Tripadvisor Stock Fell 10% on Tuesday

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What happened

Shares of travel-planning company Tripadvisor (NASDAQ:TRIP) closed Tuesday’s trading 10.2% lower, having fallen as far as 11.1% earlier in the day. The company reported third-quarter results early in the morning, and investors were not impressed by the reported figures.

So what

Tripadvisor’s third-quarter sales doubled year over year to $303 million, with the caveat that the year-ago period saw very limited interest in travel due to the raging coronavirus pandemic. Adjusted earnings swung from a net loss of $0.17 per share to a profit of $0.16 per share, both on an adjusted basis. Your average Wall Street analyst was expecting earnings near $0.24 per share on revenue in the neighborhood of $308 million, and Tripadvisor fell short of both targets.

On top of the disappointing earnings report, co-founder and CEO Steve Kaufer chose this moment to announce his retirement after more than 20 years with Tripadvisor. Kaufer will stay in the captain’s chair until a suitable successor has been found at some point in 2022.

Image source: Getty Images.

Now what

Tripadvisor’s experiences and dining segments have essentially returned to the revenue levels they saw in 2019 before the COVID-19 health crisis. The hotel and media division is lagging behind in its recovery, producing just 72% of the top-line sales it generated in the third quarter of 2019. More to the point, the hotel operation’s recovery seemed to hit a snag during this reporting period as September’s results came in below July and August’s.

The stock’s strong recovery in the early spring proved to be short-lived, and Tripadvisor has now fallen 52% below those yearly highs. It’s difficult to get excited about the 75% year-over-year return when you take a second look at the coronavirus caveat — this rebound started from rock-bottom prices.

Furthermore, Tripadvisor’s stock was experiencing a painful downward slide long before COVID-19 showed up. Getting back to what was normal in 2019 would not necessarily inspire me to buy this troubled stock. There are many better picks in the travel sector whether you’re looking for a fundamentally solid business or an exciting turnaround play.

TRIP data by YCharts

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.