TRIP - Tripadvisor Inc.

[cubsfan]

I have read the thread and am quite familiar. There's a substantial difference in opinion.

TRIP was over $100 just a few years ago, and then the long ride down. Where's the euphoria?

 

 

[KCLarkin]

Maybe I have CoBF tunnel vision, but I disagree. There's been quite a bit of hedge fund "hype" in TRIP for last year or two. Read this thread and look at the links.

 

The only hedge funds I follow that are hyping TRIP are Greenhaven and GreenWood. Both are tiny funds. TRIP is a pretty crowded trade -- on the short side.

[kab60]

Maybe I have CoBF tunnel vision, but I disagree. There's been quite a bit of hedge fund "hype" in TRIP for last year or two. Read this thread and look at the links.

 

The only hedge funds I follow that are hyping TRIP are Greenhaven and GreenWood. Both are tiny funds. TRIP is a pretty crowded trade -- on the short side.

GreenWood might hype a bit, Greenroad seems pretty balanced (making it clear execution has been lacking but sees it as an opportunity to improve considering the asset). Mecham has been in and out with tiny positions so wouldn't call that hyping - maybe to the contrary.

[cubsfan]

And, of course, who ever authored this conveniently left out some facts.

 

Like the payoff of $230M in debt - if it wasn't paid with cash, how was it paid?

 

Like the stock buyback - yea, they only bought back $4M shares in Q1, but another $96M by 5/7.

Wonder if they used cash to buy back stock?

 

Curious why he would omit such important items given his objectivity?

[peterHK]

Over the past 5 years, TRIP has generated $10 per diluted share in FCF (CFO less capex, which I appreciate is not FCFF nor truly FCFE) (adjusting for dilution since I'm including SBC within FCF). Adjusting for SBC, it's $7.58/diluted share.

 

Over the past 3 years, it's been $2.40/share including SBC etc. They generate cahs just fine, and that's inclusive of an increasing spend on TV advertising that over time they should need less of as network effects start to make more of the platforms monetization take place on the app.

 

That cash has gone to, as others have pointed out, share buybacks, debt repayment, and then acquisitions.

 

The "contrarian analyst" doesn't seem to do much analyzing.

[Foreign Tuffett]

Over the past 5 years, TRIP has generated $10 per diluted share in FCF (CFO less capex, which I appreciate is not FCFF nor truly FCFE) (adjusting for dilution since I'm including SBC within FCF). Adjusting for SBC, it's $7.58/diluted share.

 

Over the past 3 years, it's been $2.40/share including SBC etc. They generate cahs just fine, and that's inclusive of an increasing spend on TV advertising that over time they should need less of as network effects start to make more of the platforms monetization take place on the app.

 

That cash has gone to, as others have pointed out, share buybacks, debt repayment, and then acquisitions.

 

The "contrarian analyst" doesn't seem to do much analyzing.

 

Doesn't seem like a particularly heroic amount of cash generation relative to the current share price?

[peterHK]

Over the past 5 years, TRIP has generated $10 per diluted share in FCF (CFO less capex, which I appreciate is not FCFF nor truly FCFE) (adjusting for dilution since I'm including SBC within FCF). Adjusting for SBC, it's $7.58/diluted share.

 

Over the past 3 years, it's been $2.40/share including SBC etc. They generate cahs just fine, and that's inclusive of an increasing spend on TV advertising that over time they should need less of as network effects start to make more of the platforms monetization take place on the app.

 

That cash has gone to, as others have pointed out, share buybacks, debt repayment, and then acquisitions.

 

The "contrarian analyst" doesn't seem to do much analyzing.

 

Doesn't seem like a particularly heroic amount of cash generation relative to the current share price?

 

Historics are irrelevant, what matters is the future cash generation potential which is driven by a few things:

 

1) More efficient ad spend as more traffic moves onto the app vs. from Google.

2) Better monetization on mobile (used to be 20% of desktop, and now is 40%, and should reach 50%) and more  mobile users vs. desktop. At some point (soon) there will be an inflection where mobile users are growing fast enough to offset desktop declines.

3) Growth in the attractions business which scales rapidly as all platform businesses do.

 

The result is exponentially expanding margins and FCF generation, not linear, due to the fact this is a platform business and that's how they tend to behave when they start to work well. TRIP's cash flow per share dropped very rapidly on the way down, and I expect it will expand very rapidly on the way up.

[gary17]

I didn't know AirBNB has these local tours too now - quite similar to what TripAdvisor's been doing.  May be I missed it earlier - just thought it is interesting to see how they compete in this space.

 

https://www.airbnb.ca/experiences/243204?location=Dublin%2C%20Ireland&source=p2&currentTab=all_tab&searchId=21c7118c-f06a-4a02-b98c-5ffb1a23c3b6&federatedSearchId=b68c8670-8505-4d66-aa7b-5f6bfc748bbe&sectionId=eac6eeaa-cd92-4232-af64-df6ea39497da

 

[gary17]

Q2 2018 is out

http://ir.tripadvisor.com/static-files/a8b88a72-0d45-47a6-be65-e47de05141b5

 

stock down 13%!

[Spekulatius]

Q2 2018 is out

http://ir.tripadvisor.com/static-files/a8b88a72-0d45-47a6-be65-e47de05141b5

 

stock down 13%!

 

The numbers look very weak to me, given the valuation and recent runup. Stock might well go down more.

[peterHK]

This one has worked out well, very nice quarter this quarter from them.

 

I'm starting to trim my position as I think the 3-5 year IRR' s on this are worse than other things I'm considering.

[kab60]

I'm completely out but sold before the big upmove today. I thought it was very attractive at 30-40 whereas I feel other ideas are much easier to get comfortable with at this valuation.

[patientcapital]

This is now what happens when you search for a hotel through Google search (desktop):

 

https://imgur.com/a/M1qU5wh

 

Notice my windows bar at the very bottom. Their booking tool takes up the ENTIRE SCREEN!

 

In the past you could also see the top search results, which would include Booking, Tripadvisor, etc.

 

Now you physically have to scroll down to see those. As we know from SEO world, the top 1-3 results are coveted, and anything that's on the second page of a google search gets less than 1% of the total clicks. This is a big blow for any sites that rely on Google SEO for a large part of their hotel booking traffic.

 

Google has supplanted itself above the SEO driven results that so many companies like Tripadvisor have been reliant on. This is bad for Booking, Expedia, TripAdvisor, Trivago, etc.

 

Article on it from Skift today:

 

https://skift.com/2019/03/11/google-quietly-releases-its-hotel-booking-destination-with-potentially-huge-implications/

 

This is why I sold $TRIP.

 

Not to toot my own horn, but I shared my high level thoughts on the Google threat in a February 2018 reply within this thread if you're curious.

[scorpioncapital]

But when you click to book a room on that screenshot the first two places to book come up as Booking and Expedia. Next few listings appear to be other labels of booking and expedia and a few others below.

 

However what I see somewhat interesting is what happens when Homeaway and Airbnb apartment listings start popping up on the google search? That will be quite different. Or even you type rent 3 months XYZ city and you can book an apartment right there on google .

[patientcapital]

Fair enough, I probably shouldn't have included Booking/Expedia as being in the same bucket as TRIP/TRVG, but it will negatively impact them somewhat.

 

The main point is that the metasearch business is in trouble. That's TripAdvisor & Trivago's core. Booking does have a meta business, but Kayak is small vs total, so probably not as relevant.

 

But two things are going to happen to BKNG/EXPE.

 

1. Part of their existing Metasearch spend shift from TRIP/TRVG to Google:

 

Within Expedia/Booking's existing metasearch spend, some of it will shift from TRVG/TRIP to Google's metasearch (through this new tool). That means that their huge paid customer acquisition spend will continue to concentrate in Google's hands, which isn't a great thing for them, even if that amount of dollars didn't go up per se.

 

2. Part of their free traffic will become paid traffic:

 

Booking/Expedia get a good % of their traffic from free sources. These include google search results (Booking.com shows up when you search for 'hotels in Seattle' as a search result). Since this tool is now presented at the top, someone like Booking will have their links get pushed downward, and some of what would have been free traffic will now get diverted to this paid channel (Google's hotel search tool). In other words, what was once free traffic will now be paid traffic, and this eats at EXPE/BKNG, but not as bad as TRVG/TRIP.

 

[scorpioncapital]

Yeah. I actually think also the entire booking business of hotels is in jeopardy. I mean when you click on your hotel and Expedia, booking etc..come up with the prices, perhaps 5-7 listings. The prices are almost identical. Except for perhaps some reputational value and an aggregated account, I don't care which one I buy through. However, if it is something more exclusive like an apartment it might be different as prices can differ substantially in one street I suppose and might be exclusive to a particular platform.

[patientcapital]

Bingo.

 

I think if you look to the airfare business, all the margin for the OTAs has been sucked out, and they pretty much abandoned that line of business. Hotels will probably look similar in the future.

 

The biggest difference between hotels and airlines is that there are tons of hotels and fewer airlines, so it's a much harder search problem to solve. The invention of metasearch all but solved that issue, and made the process somewhat easy.

 

You're right, there's too many booking engines all offering the same hotels at the same price. It doesn't make sense. That's especially the case for the hotel itself who is paying 15% to those commoditized OTAs.

 

Google hates vertical/metasearch (per my February post), and they intend to capture those $ for themselves, as well as divert customers to the hotel itself. They'll do this all while capturing a bigger piece of the total pie.

 

Google is the real play here. I wish I bought it back in 2012 when it was trading for like 12-15x earnings. Really stupid on my part.

[scorpioncapital]

Do you think governments (I think EU tried it) will force Google to share the space with the 'soon to be dying' competitors? )

 

 

[patientcapital]

Hard to know the answer to that question. Anything is possible when you have wacky politicians on either side of the aisle (at least here in the USA where I am).

 

I don't know about that kind of regulation, but I do think there are other forms of regulation about privacy or monetizing user data that are very possible. IMO the biggest risk for any of these tech giants is government regulation. But that makes a pretty good business if you ask me - their biggest risk is that they are too good of a business.

 

I like Peter Thiel's explanation - real monopolies try to make it look like they aren't monopolies.  Crummy businesses try to make it look like they are more dominant than they are.

 

 

[patientcapital]

Below is a link that further discusses what we discussed earlier in this thread - how google is squeezing out companies like TRIP that rely on free google traffic.

 

https://stratechery.com/2019/the-google-squeeze/

[walkie518]

Below is a link that further discusses what we discussed earlier in this thread - how google is squeezing out companies like TRIP that rely on free google traffic.

 

https://stratechery.com/2019/the-google-squeeze/

While I agree with the gist of this article, I am not certain all is lost.

 

In organic search, tripadvisor seems to come in first for restaurants or hotels whenever I've tested since the awful quarter.  Should TRIP choose to spend more on advertising w/Google, they will be on the top.  Then again, Google will wind up with a little bit less money but more than what they're currently generating. 

 

Tangential but I must note that it's also a little gross what has happened to Google.  At one point, they did no evil.  Now, the platform is mostly ad-driven and it's less of a useful experience--this might hint to a Foxification of the internet where opinions drive narratives.  Also, that youtube is filled with ads justifies paying for content from other providers?

 

[Sportgamma]

This situation is getting super interesting. The TripAdvisor value erosion has been emense. It befuddles me that Maffei has tolerated Kaufer for this long. If this is not a special situation, then I don't know what is.

 

 

Whatever happens from now on will be driven by the needs of Maffei and LTRPA.

 

 

 

 

[Jurgis]

I gave up on Maffei providing good leadership or great capital allocation some time ago.

 

YMMV. Good luck.

[Sportgamma]

I gave up on Maffei providing good leadership or great capital allocation some time ago.

 

YMMV. Good luck.

 

I get you, but to me, this situation is not about whether Maffei is a capital allocator or not. Capital allocation at TRIP has been atrocious since the spin-off and they were totally outmanoeuvred by Booking. The hope is now on Viator but what happens when Booking acquires Get Your Guide or Klook? 

 

But at this stage, Maffei will be forced to do something. If TRIP drops much further, LTRIPA must be getting close to a margin call. The leverage cuts both ways.

 

I haven't quite dipped in yet, but it's getting very tempting.

 

[Jurgis]

I gave up on TRIP/LTRIPA some time ago too.

 

Good luck to you.