Proactive Investors - Tripadvisor Inc (NASDAQ:TRIP) presents an “appealing” risk/reward profile at its current share price but lacks near-term catalysts, analysts at Wedbush believe.
Following an investor meeting with Tripadvisor CFO Michael Noonan and vice president of investor relations Angela White, the analysts awarded the stock a ‘Neutral’ rating and a $21 price target.
Shares of Tripadvisor - which operates online travel agencies, comparison shopping websites, and mobile apps with user-generated content - traded just shy of $18 on Friday afternoon.
The analysts wrote that, while a transaction does not appear imminent, based on their sum-of-the-parts (SOTP) analysis they continue to believe an acquisition or other strategic alternative would unlock value for shareholders.
“Our SOTP analysis results in an implied value per share of $23, assuming a 1.5x multiple on 2025E Viator revenue and a 4.0x multiple on Brand Tripadvisor 2025 estimated earnings before interest, taxes, depreciation and amortization (EBITDA),” they wrote.
“We would expect multiple expansion should the company validate Viator's margin potential in the coming quarters and/or reinvigorate growth in the core business next year.”
Looking at near-term trends, the analysts wrote that the travel industry remains healthy.
“Management has observed healthy intent from consumers on the platform, suggesting ongoing resiliency for leisure travel spending,” they wrote. “That said, the industry should continue to experience some normalization in travel demand this year.”
They added that near-term factors are driving weakness in TripAdvisor’s core business, such as the shift of timing of Easter into March which will negatively impact the company’s second quarter revenue.
The business also experienced a “noticeable impact” on its SEO rankings due to a wide-reaching Google (NASDAQ:GOOGL) SERP update, which negatively impacted Q1 revenue in the core segment.
“Importantly, Tripadvisor has already implemented changes to mitigate these impacts and performance has largely returned to normal, though the impact in April will partially weigh on Q2,” they wrote.
“While the media and advertising segment was a bright spot in Q1, the business benefited from a pull-forward of some revenue that would have been otherwise recognized in Q2. However, management is overall pleased with the segment's performance and expectations for 1H24, as the company generates a higher contribution from new advertising opportunities and a shift away from purely programmatic spend.”
Management also reiterated that its approach to its full-year guidance is conservative, the analysts noted.
“While Q1 results were broadly within or better than expectations, full-year guidance was weaker-than-expected as the company is taking a cautious approach and expects 2024 revenue growth of low to mid-single digits and flat to low-single digit adjusted EBITDA growth,” they wrote.
“The guidance reflects some softness that management observed in certain demand signals, and anticipates that the dynamics that impacted Q1 results and performance in April (including the continued normalization of travel demand) could pressure revenue growth over the remainder of the year.”