Tripadvisor (NASDAQ: TRIP) needs more than advice
Since early 2024, Tripadvisor (NASDAQ: TRIP) has explored a potential sale, rejecting takeover bids ranging from $18 to $30 per share. It now trades at $17.50.
Last week, activist investor Starboard Value acquired a 9% stake in the world’s biggest travel information company, now worth $186 million. The stock has skyrocketed 34% so far this month as a result, leaving it barely changed over the past 12 months.
Starboard has driven change at companies like Autodesk (NASDAQ: ADSK), Kenvue (NYSE: KVUE), and Pfizer (NYSE: PFE). The change has included divestitures, board restructurings, and cost-cutting. Obviously Starboard believes Tripadvisor’s stock is undervalued.
It may push for the sale of Tripadvisor’s Viator unit, which books tours and activities for travelers and accounted for 46% of the company’s revenue last year. Analysts estimate that could go for $1.7 billion to $2.5 billion.
Starboard also could lead TripAdvisor to dump TheFork brand, which books restaurant reservations and made up 10% of the company’s revenue last year. That could go for $360 million-$580 million.
The investor also might call for operational improvements to revive revenue for the core brand – travel information and advice. And it might seek board and capital structure changes, including share repurchases. Starboard could facilitate a strategic overhaul or lead Tripadvisor to a sale.
Where the competition lies
Tripadvisor faces intense competition in its core business from platforms like Google Reviews, Yelp, Booking.com (NASDAQ: BKNG), and Expedia (NASDAQ: EXPE). And Amazon (NASDAQ: AMZN) and Meta Platforms (NASDAQ: META) may soon be added to that list, says Morningstar analyst Dan Wasiolek.
Google’s dominance in search engines often overshadows Tripadvisor’s listings, while Booking.com and Expedia provide seamless booking experiences with extensive property databases. Social media influencers and niche travel apps challenge Tripadvisor too.
Another problem for the company is authenticity challenges of its user reviews. Last year, 8.2% of submissions were nabbed as fraudulent. Meanwhile, changing consumer preferences for personalized, mobile-first experiences could depress the company’s market share.
Still, Tripadvisor’s focus on Viator and TheFork could allow it to capitalize on the growing demand for experiences. Wasiolek predicts Viator and TheFork will enjoy average annual sales growth of 9% and 10% respectively from 2025-34. Strategic partnerships for AI-driven insights, such as with Perplexity, should boost the company’s ability to deliver tailored travel information.
As for Starboard, its involvement is no guarantee of success. It hasn’t yet said what it wants to do at Tripadvisor.
History of Starboard
Back in the day, Starboard had a golden touch, including forays into Darden Restaurants (NYSE: DRI), AOL and Office Depot. In 2014, “the most feared man in corporate America” was Starboard CEO Jeff Smith, renowned financial writer William Cohan penned in Fortune.
From 2002-14, Starboard’s generated annualized returns of 15.5%, according to Wikipedia. Yet the past few years haven’t been as kind. A weighted average of Starboard Value fund’s 20 biggest stocks produced an annualized return of 14.6% over the past three years, far behind the S&P 500’s 23.9% return, according to Hedge Follow research service.
The fund returned less than 5% last year, sources told Bloomberg. Its current holdings include Pfizer, Salesforce (NYSE: CRM) and News Corp. (NASDAQ: NWSA).
Turning back to TripAdvisor, it clearly has strengths, such as Viator and TheFork. But given the heavy competition in its core business, the journey ahead could be bumpy.
