Travel information company TripAdvisor Inc. (TRIP) saw its shares rallying more than 9% to $84.45 on Expedia’s (EXPE) outstanding fourth-quarter results.
Late Friday, Expedia reported a quarterly net profit of $113.4 million, or 9.8% net profit margin, up 52.2% year over year. This increase in adjusted earnings was the highest in five quarters. Revenues for the quarter were $1.15 billion, down 17.8% sequentially but up 18.2% year over year, driven by healthy growth rates across most brands. The strong results were driven by the secular growth in the online travel booking industry.
TripAdvisor derives slightly less than a third of its business from Expedia, so the optimism regarding Expedia’s results wasn’t too surprising. In fact, the robust quarterly performance from the biggest online travel agency (OTA) in the U.S., Expedia, lifted shares of not just TRIP, but also other online travel companies like Priceline (PCLN) which added 5% to close at $1,195.39 and Orbitz Worldwide (OWW), which gained 4.2% to $7.43.
Analysts are hoping that the positive trend will continue when TripAdvisor reports fourth quarter results on Feb 11, 2014.
In 2013, TripAdvisor ventured into new markets and added new features to improve its mobile products. The company also launched its new meta-display platform which received good response from advertisers. This feature allows users to compare hotel pricing and availability data from top advertisers on TripAdvisor's website itself. Realizing TripAdvisor’s potential as an important traffic generating channel, the OTAs are generating fresh bids on the platform, allowing the former to hike advertising rates.
These initiatives have helped TripAdvisor to grow its user base and drive up page views per visitor since users now spend more time on its website. A strong return of 79.0% YTD and various initiatives taken by management should help TripAdvisor’s upcoming fourth-quarter results.
Currently, TripAdvisor has a Zacks Rank #3 (Hold).
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