Tripadvisor’s Viator Brand in High Demand

We don’t expect a meaningful adjustment to TripAdvisor’s TRIP $32 fair value estimate after it posted better-than-expected fourth-quarter results, with commentary around 2023 matching our forecast. We see shares as undervalued.

Fourth-quarter sales of $345 million represented 106% of 2019′s level, surpassing our 101% forecast and compared with the 107% mark reached last quarter. Upside was driven by TripAdvisor’s experiences brand, Viator, which saw revenue jump to 208% of 2019′s level in the quarter, easily outpacing our 167% estimate and improving on the 179% mark of last quarter. Viator remains the leader in the $200 billion experiences market, of which only 30% of all transactions are currently done online. Meanwhile, the company’s core business revenue achieved just 85% of 2019′s level in the quarter, missing our 87% forecast, as its metasearch hotel business continues to face intense competition from Google. That said, the core business remains highly profitable, with its 36% EBITDA margin in 2022 up 900 basis points from 2021. And despite continued investment into Viator, TripAdvisor’s total 2022 EBITDA margin of 20% was ahead of our 19% forecast. We expect similar margins in 2023, with low-double-digit percentage sales growth, in line with management’s targets.

In our view, the key for TripAdvisor shares will be whether it can improve the core metasearch platform performance. In this vein, new CEO Matt Goldberg revealed his plan to monetize the network. He detailed a new team structure, with leadership across product, marketing, technology, data, and sales focused on leveraging data to offer improved customized content and travel recommendations, while also driving margin expansion over the next several years. In our view, Goldberg faces an uphill battle that others have waged and lost, and we don’t see how this strategy will materially alter our view that Tripadvisor’s metasearch sales growth will lag that of the industry for the foreseeable future.