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Tripadvisor Shares Tank 13% After Warning Of Falling Margins

Tuesday, November 8, 2016 14:33
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Online travel agent and reviews site Tripadvisor Inc (NASDAQ:TRIP) late Tuesday posted mixed third quarter earnings results and warned that its 2017 margins would fall, sending its shares plunging in after-hours trading.

The Needham, MA-based company reported Q3 earnings per share (EPS) of $0.53, narrowly beating Wall Street’s view of $0.52. Revenues rose 1.4% from last year year to $421 million, missing analyst estimates for $436.93 million.

The company noted via press release that its 2017 margins will fall from 2016 levels, largely due to a larger ad spend and other paid marketing initiatives, which it hopes will reaccelerate Hotel business growth:

“In 2016, we have made a lot of progress aligning our products and platform for long-term growth. However, this progress has clearly had a negative impact on our 2016 revenue growth amidst what remains a competitive travel landscape. Now that we have our transaction products in place, and we have been able to learn and improve, our 2017 focus will shift to re-accelerating revenue growth in our Hotel business, and we believe paid marketing channels will play an important role. Therefore, we believe our 2017 adjusted EBITDA margin will likely be lower than the margin we achieve in 2016. We are still in the early days of re-educating users about our end-to-end user experience, building repeat behavior and plugging the monetization leak in our business. We believe this journey will pay off financially, but will take time. Consistent with our past commentary, we play the long game and remain focused on building for the long-term.”

Tripadvisor shares fell $8.09 (-12.82%) to $55.01 in after-hours trading Tuesday. Prior to today’s report, TRIP had already fallen nearly 26% year-to-date, badly trailing the benchmark S&P 500’s 4.94% gain in the same period.


ETF investors will want to keep an eye on the First Trust Dow Jones Internet Index Fund (NYSE:FDN), which is the fund with the largest percentage exposure to TRIP. The stock accounts for about 2% of FDN’s holdings, and thus could be a drag over the next several sessions as a result.

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