Tripadvisor has been a dominant player in the travel review industry for nearly two decades, boasting over one billion reviews on its platform. However, its relevance is being questioned with the rise of Google Maps, offering similar services.
Financially, Tripadvisor's growth appears to be stagnating. In 2019, the Tripadvisor brand generated $939 million in revenue, but in 2023, the company's total revenue through the first three quarters was $813 million, indicating marginal growth over four years. Despite this, Tripadvisor owns Viator, a travel platform that has shown impressive growth. Acquired about a decade ago, Viator's business model is akin to Airbnb's, focusing on bookable experiences provided by third parties. Viator's revenue in the first three quarters of 2023 was $576 million, a 57% increase from the previous year, accounting for 46% of Tripadvisor's total revenue.
Tripadvisor's stock appears attractive, trading at less than two times its trailing sales and boasting a high gross margin above 90%. However, profitability remains a concern due to high sales and marketing expenses, which are disproportionate compared to its peers Airbnb and Booking Holdings. There's speculation that Viator may gain enough brand recognition to drive organic traffic, reducing dependency on marketing expenditure, potentially improving profitability.
However, investors should exercise caution. Tripadvisor was not listed among the top 10 stocks recommended by The Motley Fool Stock Advisor, suggesting that there may be better investment opportunities available.
- Challenged Relevance and Stagnant Growth: Tripadvisor's traditional business model is facing challenges from competitors like Google Maps, and its overall growth has been minimal in recent years.
- Viator as a Growth Engine: The acquisition of Viator represents a significant growth opportunity for Tripadvisor, differentiating its business model and contributing significantly to its revenue.
- Financial Viability and Investment Caution: While Tripadvisor's stock is currently undervalued with high gross margins, concerns about its high marketing costs and lack of consistent profitability suggest that investors should approach with caution, considering other potentially more lucrative investments.