CTAs are almost max long in equities, have very limited room to buy: UBS
On Wednesday, B.Riley adjusted its stance on TripAdvisor (NASDAQ:TRIP) stock, moving from a Buy to a Neutral rating, and slashed the price target to $19.00 from the previously set $26.00. This decision reflects growing concerns over the company's core revenue and margin prospects.
The travel platform has experienced a decrease in revenue growth and margins within its core operations, as indicated by management's outlook. The challenges of a slowing travel sector and intense competition are impacting TripAdvisor's top-line growth. Management's planned investments aimed at long-term sustainable growth are expected to further pressure short-term margins.
Further influencing the downgrade is the performance of Viator, a TripAdvisor company, which has reported a decline in bookings over recent quarters. The potential for a spin-off of Viator, once considered a possible positive event for TripAdvisor's stock, is no longer expected in the near term. This removes what was seen as a catalyst for the company's stock performance.
The analyst noted the absence of immediate catalysts that could drive the stock's value, barring the unforeseen interest of a buyer. With no clear visibility into such a development, B.Riley has chosen to adopt a more cautious approach and step back from a more optimistic rating.
In other recent news, TripAdvisor has reported a year-over-year revenue increase of 6% to $395 million for the first quarter of 2024, with adjusted EBITDA standing at $47 million.
Despite a revenue decline from Brand TripAdvisor, the company saw significant growth in its Viator and TheFork segments, with revenues jumping by 23% and 17% respectively.
However, Citi has reduced the price target for TripAdvisor shares to $20 from the previous $28, citing projected revenue headwinds and strategic changes within Brand TripAdvisor that are anticipated to shrink EBITDA margins slightly.
Similarly, Truist Securities has lowered its price target for TripAdvisor to $21 from the previous $28, reflecting adjusted earnings projections for the coming years.
TripAdvisor's recent guidance forecasts total revenue growth in the low to mid-single-digit range for 2024, with flat to slightly positive revenue growth expected in the second quarter.
The company is also making strategic investments in marketing, product innovation, personalization, loyalty, and AI as part of its recent developments.
Despite these strategic shifts, TripAdvisor's Special Committee has concluded that a transaction with a third party would not align with shareholder interests at this time.
InvestingPro Insights
In light of B.Riley's recent rating change for TripAdvisor (NASDAQ:TRIP), current data from InvestingPro offers additional perspective on the company's financial health and market performance. TripAdvisor boasts a robust gross profit margin of 91.45% over the last twelve months as of Q1 2024, underscoring the company's ability to maintain profitability despite the challenges in the travel sector. This aligns with one of the InvestingPro Tips highlighting the company's impressive gross profit margins.
Moreover, TripAdvisor's management has been proactively engaging in share buybacks, as noted by another InvestingPro Tip, which could signal their confidence in the company's value proposition. This strategic move might be of interest to investors considering the company's long-term potential. Despite a significant price drop over the last three months, with a 35.95% decline, the company's liquid assets exceed its short-term obligations, suggesting a stable financial position for handling immediate liabilities.
While TripAdvisor's P/E ratio stands at a high 94.22, the adjusted P/E ratio for the last twelve months as of Q1 2024 is more moderate at 49.2, indicating a more favorable valuation when considering near-term earnings growth. Investors looking for a more in-depth analysis can find an additional 10 InvestingPro Tips on https://www.investing.com/pro/TRIP, offering further insights into TripAdvisor's investment potential.
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