Tripadvisor stock rises on surprise announcement, earnings beat

Travel company Tripadvisor (NASDAQ:TRIP) has had quite an interesting week, starting with an announcement on Monday that caught a lot of investors off guard.

The company released a statement saying it was forming a special committee to evaluate any potential buyout proposals that may come forward, including those that may arise from a recent disclosure by its majority owner, Liberty TripAdvisor Holdings (OTCMKTS:LTRPA), of its intent to “evaluate potential alternatives involving LTRP and Tripadvisor.” Centerview Partners was retained to conduct the evaluations.

Tripadvisor’s stock price spiked on Tuesday after the announcement. Then on Thursday morning, the company released fourth-quarter earnings results that topped estimates, and its share price surged in morning trading. Since last Friday’s close, Tripadvisor’s share price has climbed 24% to around $27 per share as of Thursday morning.

Exploring a potential sale?

The Monday announcement follows a filing on Feb. 9 from Liberty TripAdvisor Holdings, which owns roughly 21% of Tripadvisor stock representing about 57% voting interest through its ownership of 16.4 million shares of Class A and 12.8 million shares of Class B common stock.

That filing said the Liberty Tripadvisor board authorized the company “to engage in discussions with respect to a potential transaction pursuant to which all of the outstanding stock of the Issuer and all of the outstanding common stock and Class B common stock of Tripadvisor, Inc., a Delaware corporation, would be acquired concurrently for cash.”

That Feb. 9 filing also noted that Tripadvisor formed a special committee to engage in discussions about a potential transaction, which Tripadvisor announced Monday. The filing adds that if any such transaction is consummated, Tripadvisor, as well as Liberty TripAdvisor, would “cease to be publicly traded companies.”

It is a bit confusing, but it sounds as if there are discussions with a potential buyer to take the company private.

On the fourth-quarter earnings call on Thursday, Tripadvisor CEO Matt Goldberg said up front that the company “won’t address any questions on this topic today or provide further updates unless we have something definitive to share.”

As for the fourth-quarter results, Tripadvisor beat estimates as noted, with its revenue up 10% year over year to $390 million and its net income at $32 million, or 22 cents per share, up from a net loss of $3 million in the fourth quarter of 2022. For the full year, the company’s revenue jumped 20% to $1.8 billion, which is an all-time high. Tripadvisor’s net income for the full year was $10 million or 8 cents per share, down from $20 million the previous year.

“In addition to growing our revenue more than 10% higher than our previous peak, we have diversified our portfolio, with experiences now delivering more than 40% of our revenue, as we continue to drive our transformation at Tripadvisor, market leadership at Viator, and profitable growth at The Fork,” Goldberg said in the earnings release.

No official guidance or outlook

Later in the earnings call, Goldberg added that the company is focused on growing and diversifying the business through its multi-year plan, and the announcement doesn’t change that. However, while he did provide some commentary on their priorities and projections for 2024, he did not give any official guidance or outlook in light of the formation of the special committee and the evaluation of potential offers.

Goldberg did say that the company expects an overall healthy travel market in 2024, but with some “normalization.” He said the first quarter is likely to be the most challenging compared to the previous year. Looking at the firm’s three businesses, Goldberg projects stable revenue in 2024 in its Brand Tripadvisor arm and slightly lower growth in its Viator and The Fork segments. However, all three businesses are expected to be profitable this year.

Liberty TripAdvisor is set to host its quarterly Q&A conference call on Feb. 16, so perhaps there’s more to learn from that event. Otherwise, things remain up in the air with this stock.