What happened
Tripadvisor (NASDAQ: TRIP) shareholders lost ground to a declining market this week. The travel booking specialist's stock fell 12% through Thursday trading compared to a 2.6% drop in the S&P 500, according to data provided by S&P Global Market Intelligence. The stock is now down 13% so far in 2023 while the broader market has increased by 6%.
This week's drop came as investors reacted to Tripadvisor's Q1 earnings update.
So what
The company revealed on Wednesday that sales shot higher in the Q1 period as compared to pandemic-pressured results a year ago. Revenue rose 42% to $371 million, in fact, and was up 46% after accounting for currency exchange rate shifts. "We are pleased with our strong start to 2023," CEO Matt Goldberg said.
Yet the business wasn't able to profit from that higher revenue base. Net loss landed at $73 million, or $0.52 per share. Tripadvisor also took a step backwards on adjusted earnings, which fell to 9% of revenue compared to 12% of sales in the prior quarter. The company spent aggressively on marketing and tech development, especially in the Viator and core Tripadvisor platforms.
Now what
The good news is that this extra spending did appear to drive more traffic to Tripadvisor's travel and experience booking platform. Management said demand in the travel industry is holding up well into early 2023, too. Cash flow is also solidly positive today.
But executives appear set to continue investing aggressively in the business, which will likely keep pressure on earnings in 2023. Until the company can show a clear path toward sustainable profitability, the stock will be subject to volatile swings like the one that shareholders saw this week. That volatility will be especially pronounced when investors become more worried about a potential recession on the way, as they did over the last several days.
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Demitri Kalogeropoulos has positions in Tripadvisor. The Motley Fool has positions in and recommends Tripadvisor. The Motley Fool has a disclosure policy.
