Mobile To Continue To Hurt TripAdvisor, Wells Fargo Says

Tripadvisor Inc TRIP reported its 2Q revenue short of expectations. Although headwinds related to TripAdvisor’s transition to Instant Bookings [IB] would likely ease going ahead, mobile related pressure are expected to continue, Wells Fargo’s Peter Stabler said in a report. He maintains a Market Perform rating on the company, while lowering the valuation range from $70–72 to $66–$68.

TripAdvisor reported its 2Q16 revenue at $391 million, missing the Argus estimate by 3.5 percent and the consensus forecast by 3 percent. EBITDA came in at $95 million, 9 percent short of the Argus estimate and 8 percent below the Street.

Headwinds To Continue

“TRIP's transition to Instant Booking (IB) and the platform share shift from desktop to mobile continue to present headwinds,” Stabler said. Management has indicated additional pressure in June and July from macro uncertainties and safety concerns.

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Stabler commented that although the transition to IB has the potential to “narrow the mobile monetization gap on phones from a conversion standpoint,” the average phone transaction values represent only about 30 percent of the desktop levels and “will require shifts in consumer behavior to reach an equilibrium and drive a materially higher share of travel booking economics for TRIP.”

Although IB-related headwinds could ease in the future, mobile related pressures would continue, the analyst believes. He lowered the revenue and non-GAAP EPS estimates for FY16 from $1.58 billion to $1.53 billion and from $1.77 to $1.63, respectively. The revenue and non-GAAP EPS estimates for FY17 have been reduced from $1.82 billion to $1.76 billion and from $2.25 to $2.06.

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