Tripadvisor Stock: Superior Experiences and Growth in the Restaurant Segment (NASDAQ: TRIP)

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In this analysis by Tripadvisor, Inc. (NASDAQ: JOURNEY), we analyzed its Experiences & Dining (E&D) segment, which allows users to make reservations for attractions and restaurants through Viator and The Fork, because it has higher revenue growth than its core hotel booking segment. In 2021, the E&D segment accounted for 34.04% of the company’s revenue, making it the second largest behind its Hotels segment.

tripadvisor income

TripAdvisor

Revenue increase

Segment Growth

2018

2019

2020

2021

2022F

2023F

2024F

2025F

2026F

Experiences and meals

372

456

186

307

360

423

496

582

683

Growth

41%

23%

-59%

65%

17%

17%

17%

17%

17%

% of sales

23%

29%

31%

34%

39%

45%

50%

55%

61%

Hotels, media and platform

1001

939

361

549

525

501

479

458

438

Growth

-2%

-6%

-62%

52%

-4%

-4%

-4%

-4%

-4%

% of sales

62%

60%

60%

61%

57%

53%

48%

44%

39%

Others

242

165

57

46

31

21

15

ten

seven

Growth

-ten%

-32%

-65%

-19%

-32%

-32%

-32%

-32%

-32%

% of sales

15%

11%

9%

5%

3%

2%

1%

1%

1%

Source: Trip Advisor, Khaveen Investments

The E&D segment managed to achieve an average 5-year revenue growth of 17% higher than the Hotels, Media and Platforms segment which recorded an average growth of -4%. As a result, over the past 4 years, the E&D segment had become a more important segment for the company, accounting for 34% of revenue in 2021, while revenue from its hotels and other segments as a % of revenue total business had declined over the period.

According to Statista, the Hotels segment of the travel and tourism market is expected to have a CAGR of 11.34% until 2026. However, according to Trefis, revenue from TripAdvisor’s hotel segment decline is primarily due to lower click-based advertising revenue on TripAdvisor-branded websites. Therefore, we expect the company’s revenue growth to be supported by its E&D segment with its superior growth and could reach 61% of total revenue by 2026 while becoming its largest segment by 2024. ahead of its Hotels segment.

Profitability

Company

EBITDA margin (5 years)

Revenue ($millions)

TripAdvisor

-1.16%

902

Reservation credits (BKNG)

32.36%

10,958

Expedia (EXPE)

3.72%

8,598

Airbnb (ABNB)

-18.98%

5,992

Medium

3.98%

6,612

Source: SeekingAlpha, Khaveen Investments

Based on a comparison of its competitors with higher revenues, the average EBITDA margin is higher than the company, which we believe highlights the opportunity to increase its profitability over time. of its growth. The company publishes its Adjusted EBITDA, which is different because it also includes other income, stock-based compensation, goodwill impairments, legal reserves and settlements, restructuring costs and other non-recurring expenses. . According to its annual report, its stock-based compensation is the largest item ($120 million) included in its adjusted EBITDA.

tripadvisor ebitda

Tripadvisor

However, we believe this may not reflect the company’s results very well, as its stock-based compensation growth has outpaced its revenue growth over the past 5 years, at 9 % versus 1%, which resulted in a larger gap between its adjusted EBITDA margins than the unadjusted margin.

Adjusted EBITDA margin

2017

2018

2019

2020

2021

Hotel, media and platform

24%

31%

40%

4%

20%

Experiences and meals

1%

-42%

-12%

Others

13%

14%

33%

26%

54%

Company Adjusted EBITDA Margin %

14.9%

17.9%

15.8%

-21.4%

2.3%

Company Unadjusted EBITDA Margin %

11.1%

14.4%

15.6%

-38.1%

-9.6%

Source: TripAdvisor, Khaveen Investments

According to the table, the margin of the E&D segment is lower than that of its Hotels segment and has weighed on the company’s total margin despite the segment’s superior revenue growth. According to management, the adjusted EBITDA of the E&D segment is low due to high strategic investments such as marketing. However, the company expects the EBITDA margin of this segment to increase over the long term, as explained below.

For E&D, we expect long-term margins to be a mid-to-high percentage of EBITDA margin, a mid-to-high percentage of EBITDA 20s. – Ernst Teunissen – Financial director

According to analyst Vince Ciepiel of Cleveland Research, the segment’s variable cost as a percentage of revenue is over 50%, which is higher than its Hotels segment at around 30%.

Adjusted EBITDA

2022F

2023F

2024F

Hotel, media and platform

20%

20%

20%

Experiences and meals

-1%

9%

20%

Others

54%

54%

54%

Company Adjusted EBITDA Margin %

8.9%

15.1%

21%

Company Adjusted EBITDA

82.0

142.9

202.9

Stock-based compensation

121.9

125.8

131.7

Other expenses (income)

54

54

54

Unadjusted EBITDA

-39.9

17.1

71.3

Company Unadjusted EBITDA Margin %

-4.4%

1.8%

7.2%

Source: TripAdvisor, Khaveen InvestmentsWe expect E&D segment EBITDA margins could increase to 20% based on its Hotels segment margin in 2021, as we expect E&D segment margin to increase as it grows and almost reach the size of its Hotels segment in terms of revenue by 2024 and a total margin of 21% for the company. However, we expect its unadjusted EBITDA margin to be only 7.2% in 2024 after taking into account our forecast of its stock-based compensation ($131.7 million) and other expenses. ($54 million).

Comparison of competing products

Company

The Fork (TripAdvisor)

Eatapp

Resy

(American Express (AXP))

open table

(Reservation Holds (BKNG))

Yelp (YELP)

Tablein

Price per month

$95

$129

$399

$449

$249

$110

Online reservations

Yes

Yes

Yes

Yes

Yes

Yes

Table management

Yes

Yes

Yes

Yes

Yes

Yes

Waiting list

Yes

Yes

Yes

Yes

Yes

Yes

Prepayments

Yes

Yes

Yes

Yes

Yes

Yes

Guest CRM

Yes

Yes

Yes

Yes

N / A

N / A

Online ordering + contactless catering

N / A

Yes

Yes

Yes

N / A

N / A

POS integration

Yes

Yes

Yes

Yes

N / A

N / A

Partnership network

Yes

Yes

Yes

Yes

N / A

N / A

Rebates and performance management

Yes

Yes

N / A

Yes

N / A

Yes

Capacity management

Yes

Yes

Yes

Yes

N / A

Yes

Source: GuestRevu, Investopedia, The fork

We compared The Fork to its competitors based on the fees charged to merchants and the benefits offered to merchants. We have identified that compared to its competitors, The Fork has the lowest fees charged, which could be attractive to merchants. Additionally, The Fork is only behind Eatapp in terms of features provided with 9 out of 10 features. Thus, we believe that The Fork’s competitive pricing and comprehensive features give it an edge over its competitors.

Company

Comments

Total number of visits (“mln”)

Viator.com (TripAdvisor)

4.3

20.6

getyourguide.com

4.3

10.9

lonelyplanet.com

2.3

4.1

Klook.com

2.3

9.9

Source: trusted driver, Similarweb

Additionally, we analyzed the competitive advantage of Viator.com based on reviews and customer traffic. Compared to its competitors, Viator, the tours, activities and attractions booking platform, has a higher rating and a higher total number of visits for its website at 20.6 million. We believe Viator would continue to drive customer traffic and revenue due to its high reviews.

Risk: High competition

We see that one of the risks for the company is that it is in a fragmented market with low barriers to entry due to its less capital intensive nature, as the majority of its operations are based on its online platform. Therefore, we believe this could increase the competitive threat to TripAdvisor.

Verdict

In conclusion, we believe that the company’s E&D segment could benefit from its superior revenue growth at a 5-year average of 17% compared to its Hotels segment at -4%, supported by its competitive advantages with competitive fees and comprehensive features for the fork like as well as high reviews and web traffic for its Viator platform. Additionally, we expect the company’s profitability to improve with the growth of its long-term E&D segment with greater economies of scale and expect its unadjusted EBITDA margin to reach 7.2% by 2024. Overall, the analyst consensus price target for TripAdvisor is $28.63an increase of 22%.

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