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Tripadvisor (TRIP) demand and impact on revenues

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Analyzing Tripadvisor (TRIP) usage rate, you can observe interesting behavior of people that has direct impact on revenues of the company and I am not talking about growth of usage rate, which is going up all the way to the number one worldwide travel information company:

Tripadvisor usage rate (TRIP)

Tripadvisor usage rate (TRIP)

I am talking about a time shift in demand that occurs close to the third (most profitable) quarter:

Tripadvisor Q3 Relative usage rate

Tripadvisor Q3 Relative usage rate

In this chart we’ve got relative demand, comparing to the annual peak. You can see that the demand is growing “faster” towards the peak and shifting to the right (placing peak at later period).   So if in 2011 the peak was in Jul 10, at 2013 at July 30, at 2014 the peak is in second week of Aug.

It might be the change in vacation timelines or change in behavior of usage. Looking at flight rate per week we can see the very precise behavioral pattern that is not changing last 5 years (though it has been “flatten” in last decade):

Online Flight orders usage pattern per week in last decade. Travel behavior

Online Flight orders usage pattern per week in last decade. Travel behavior

While the online flight demand index is showing “only” doubling in last decade:

image007

That would mean that not only annual revenues are growing, but for Tripadvisor the delta in Q3 revenues comparing to Q2 becomes higher from year to year. It actually means that people are constantly using Tripadvisor throughout their vacation and not only to plan it and/or become more confident in planning and doing it more close to vacation itself, rather than in advance.

This way expectations of analysts becomes less accurate (underrating). Of cause for those analysts that are not doing a deep dive into demand model.

Looking at quarterly reports, we can calculate a percentage of Net profits as part of the total revenues, we can see that it is going down with the maturity of company:

Tripadvisor net profit rate

Tripadvisor net profit rate

I guess Marketing heavily eats it. Question if marketing makes its job? Well, it is easy to see based on its growth.

Does revenue impact the stock value? You know – book to market can be tricky in tec companies. Well, guess people are very straight forward with TRIP:

Tripadvisor (TRIP) Dependency between stock value and quarterly revenue. Book to market

Tripadvisor (TRIP) Dependency between stock value and quarterly revenue. Book to market

You can see per quarter model of revenue-stock value relation with different relation to Q1 (| marker), Q2 (/ marker) and Q3 (- marker) top revenue quarter, Q4 summary quarter (\ marker). Do not have too much of history, so Rsq is not representative, but if you believe in what you see, those are equations:

points “Rsq” Q Equation
3 0.9 Q1 TRIP Stock at release date = -4.176958 + 0.0003164*TRIP Quarterly Revenue
3 0.999 Q2 TRIP Stock at release date = -11.2789 + 0.0003301*TRIP Quarterly Revenue
2  – Q3 TRIP Stock at release date = -50.84224 + 0.0005238*TRIP Quarterly Revenue
3 0.998 Q4 TRIP Stock at release date = -28.3766 + 0.0005648*TRIP Quarterly Revenue

 

Well, let’s wait for >$380M Q3 revenue and (hopefully continuation of Q3 excitement dependency) >$145 stock price, reported by end of October * 😉

* Disclaimer: I am not a financial advisor and all data is based on my personal models. All actions you take are on your own risk and based on your own considerations only.

As always – Enjoy modeling 🙂

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Author: Andrey Gabdulin

www.gabdulin.com Product Development

One thought on “Tripadvisor (TRIP) demand and impact on revenues

  1. Revenue prediction was good. Unfortunately net profit as well. They throw all the money on marketing, boosting the sales. Market did not like it 😦

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