TripAdvisor stock rises, profits improve with surprising announcement
Travel agency tripadvisor (NASDAQ:TRIP) has had a very interesting week, starting with an announcement on Monday that surprised many investors.
The company issued a statement saying it is forming a special committee to evaluate any potential acquisition proposals that may arise in the future, including those that may arise as a result of the recent public disclosure of majority shareholder Liberty TripAdvisor Holdings (OTCMKTS:LTRPA). “Evaluate potential alternatives involving LTRP and Tripadvisor.” Centerview Partners was hired to conduct the evaluation.
TripAdvisor’s stock price soared Tuesday following the announcement. Then, on Thursday morning, the company reported better-than-expected fourth-quarter earnings, sending its stock price soaring in morning trading. Since last Friday’s close, TripAdvisor’s stock has risen 24% to about $27 per share as of Thursday morning.
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Monday’s announcement follows a Feb. 9 filing by Liberty TripAdvisor Holdings. The company owns approximately 21% of TripAdvisor shares, owning 16.4 million shares of Class A common stock and 12.8 million shares of Class B common stock, representing approximately 57% of the voting power.
The filing states that Liberty TripAdvisor’s board of directors has “authorized the company to engage in discussions regarding a potential transaction pursuant to all outstanding shares of the Issuer and all outstanding common stock and Class B common stock of Tripadvisor, Inc.” The Delaware businesses will be acquired simultaneously for cash.”
The Feb. 9 filing also states that TripAdvisor has formed a special committee to participate in discussions about the potential deal announced Monday. The filing added that if such a deal were to go through, TripAdvisor and Liberty TripAdvisor would “no longer be publicly traded companies.”
It’s a little confusing, but it sounds like there are discussions with a potential buyer to take the company private.
During the company’s fourth-quarter earnings call on Thursday, TripAdvisor CEO Matt Goldberg previewed that the company “will not address questions or provide further updates on this topic today unless we have something clear to share.”
For its fourth-quarter results, TripAdvisor beat expectations with revenue of $390 million, up 10% year-over-year, and net income of $32 million, or 22 cents per share, up 10% year-over-year. Fourth quarter of 2022. For the full year, the company’s revenue rose 20% to $1.8 billion, a record high. TripAdvisor’s full-year net income was $10 million, or 8 cents per share, down from $20 million a year ago.
“In addition to growing revenue more than 10% above our previous high, we continued to drive transformation at Viator’s market leadership, Tripadvisor, while diversifying our portfolio with experiences that now deliver more than 40% of revenue. We look forward to profitable growth for The Fork,” Goldberg said in the earnings call.
There are no official guidelines or forecasts
Later in the earnings call, Goldberg added that the company is focused on growing and diversifying its business through a multi-year plan, and the announcement does not change that. However, while he did provide some commentary on priorities and outlook for 2024, he did not provide any formal guidance or outlook for forming a special committee and evaluating potential proposals.
Goldberg said the company expects an overall healthy travel market in 2024, but with some degree of “normalization.” He said the first quarter would be the most difficult compared to the previous year. Looking at the company’s three businesses, Goldberg expects steady revenue in 2024 for its branded TripAdvisor segment and slightly lower growth for its Viator and The Fork segments. However, all three businesses are expected to make a profit this year.
Liberty TripAdvisor will be holding its quarterly Q&A conference call on February 16th, so you’ll probably learn more from that event. Otherwise, you will continue to have problems with this stock.
