As one investor touted all of the reasons he believed TripAdvisor (TRIP) was a great long idea at Wednesday's Next Wave presentation at the Sohn Investment Conference in New York, the company was preparing to report earnings that would fall short of estimates.
"We believe that TripAdvisor has the potential to be the tollbooth for the global travel market," Nick Danaher of Domando Capital said Wednesday morning. Danaher cited the company's move to mobile and the ability to register credit cards on the site (to streamline booking) as reasons to be bullish. Danaher could not be reached for comment for this story.
Later that day, the online travel site reported first-quarter results that fell short of analyst expectations. Earnings were $0.32 per share, down from $0.54 per share a year earlier, and revenue was $352 million, down from $363 million a year ago. Analysts surveyed by Bloomberg were expecting earnings of $0.46 on $370 million in revenue. The company has five Buy ratings, 18 Hold ratings and four Sell ratings.
If Sohn conference attendees were looking for immediately actionable investment ideas, this may have been one to stay away from. Shares fell as much as 7% in Wednesday's after-hours trading following the earnings release and fell nearly 2% Thursday.
Revenue was negatively affected by TripAdvisor's recently launched instant booking product, which allows users to book hotels directly through TripAdvisor. (The company was also negatively affected by currency headwinds and monetizing mobile users.)
"While the company is seeing encouraging progress in the markets where instant booking was rolled out earlier (most notably the U.S.), and the drag from IB is likely to lessen in the second half of 2016, we note that the changes still remain a headwind even in these early markets," an analyst team at Cantor Fitzgerald wrote Wednesday.
With instant booking, the company recognizes revenue at the time of traveler's stay instead of when the traveler books the reservation. TripAdvisor says that the drag on revenue is less severe in markets that have used instant booking longer but that it still expects headwinds as the product is rolled out globally.
"If instant booking has that great price and the great experience that is going to be with that initial booker is going to book," CEO Steve Kaufer said on a call with analysts Thursday. "And as we have a credit card stored, it is going to be where the repeat booker might well prefer to transact out of ease-of-use, out of the simplicity, out of offering a great price and a past great experience. That takes a while."
While Kaufer and Danaher may be willing to wait a while, Thursday's sell-off suggests investors are not.