TripAdvisor Inc. TRIP recently announced a new five-year unsecured revolving credit facility worth $1 billion to take advantage of the current favorable credit market and enhance its financial flexibility.
This credit facility will replace TripAdvisor’s existing one worth $600 million. The company will use the new facility for general corporate purposes. The present credit facility has no outstanding borrowings.
Further, the accordion feature of the new credit facility offers TripAdvisor an access to borrowing rates for the loans taken under it. The company can also take more revolving loan and term loan facilities, subject to compliance with leverage covenants and other conditions.
TripAdvisor exited the first quarter with cash, cash equivalents and short-term investments of approximately $623.0 million, higher than $563.0 million in the prior quarter. Borrowings, net of current portion were $250 million versus $260 million in the last quarter. During the first quarter, TripAdvisor generated $99.0 million in cash from operations.
Borrowing costs are still very low enabling companies to obtain easy financing. Corporate bonds and borrowings from banks are in high demand as the U.S. treasuries are offering low rates. We believe that the aforementioned move by the company will provide it with financial flexibility to drive long-term growth.
In the recently reported first-quarter results, TripAdvisor’s earnings missed the Zacks Consensus Estimate by a penny. However, the company witnessed strong top-line growth, driven by strength in click-based and display-based advertising business. Over the long term, TripAdvisor is well positioned to grow, given the expanding user base, improving margins and increasing monetization of social and mobile platforms.
Currently, TripAdvisor has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Blue Nile Inc. NILE, Expedia EXPE and Stamps.com Inc. STMP. All these stocks carry a Zacks Rank #1 (Strong Buy).
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