Analyst Note| Dan Wasiolek |
Demand on TripAdvisor’s network (source of its narrow moat) is improving, but at a slower rate than seen at narrow-moat companies Booking and Expedia. To illustrate, total sales improved to 39% of 2019 levels in March, up from 26% and 33% in January and February, respectively, with its first quarter reaching 33% of prepandemic levels versus 35% last quarter. This compares with Expedia and Booking’s first-quarter bookings improving to 52% and 47% of 2019’s mark, respectively, up from 33% and 35% in the prior quarter. Encouragingly, demand appears to be picking up, as the firm’s U.S. auction sales are currently over 90% of 2019 levels, up from nearly 80% and 67% in April and March, respectively. But this still trails other travel operators, where U.S. summer month bookings are above 2019 levels. Although we may lower TripAdvisor’s 2021 revenue toward 60% of 2019 levels versus low-60% in our existing model, we still see a full travel recovery by 2023. As a result, we don’t plan a material change to our $30.50 fair value estimate, leaving shares overvalued.