Starboard’s activist push and Tripadvisor’s response

Tripadvisor (TRIP) is in focus after activist investor Starboard Value moved to nominate a majority slate of new directors. Starboard has criticized the company’s board, past decisions, and pace of change.

Tripadvisor responded by highlighting ongoing talks with Starboard. The company reiterated that it engages with shareholders, is reshaping its operating model around Experiences, and is assessing options it believes can support long term value creation.

Tripadvisor’s share price has been under pressure, with a 30 day share price return of 21.29% decline and a year to date share price return of 29.78% decline. The 5 year total shareholder return of 80.11% decline points to long running weakness even as the recent Starboard campaign and February earnings keep attention firmly on the potential for change in how the business is run.

If activism at Tripadvisor has you thinking about where change driven stories might emerge next, it could be worth scanning our screener of travel related consumer platforms or branching out to tourism exposed names via 20 top founder-led companies as a wider hunting ground.

With Tripadvisor shares down sharply over 1 year and 5 years, trading at $10.28 and sitting below published analyst targets, is this a reset that leaves upside on the table, or are markets already baking in any future recovery?

Most Popular Narrative: 28.5% Undervalued

Tripadvisor’s most followed narrative pegs fair value at $14.38 versus the last close at $10.28, which sets up a clear valuation gap for investors to interrogate.

Tripadvisor's focus on scaling its experiences marketplace (Viator and TheFork) takes advantage of global consumer shifts toward experiential travel, as rising international leisure travel from the expanding middle class and a preference for unique experiences are both enlarging the company's addressable market and supporting sustainable, above-industry growth rates, positively impacting long-term revenue and gross profit.

Curious what kind of revenue path and margin profile that assumes, and how long it takes to play out in cash flows and valuation multiples? The narrative breaks those expectations into concrete growth, profitability and discount rate inputs that you can compare to your own view of the business.

Result: Fair Value of $14.38 (UNDERVALUED)

However, the story could look very different if organic traffic keeps sliding or if competition in experiences and hotel metasearch intensifies more than this valuation gap assumes.

Another Take On Tripadvisor’s Valuation

The narrative points to a fair value of $14.38 and calls Tripadvisor undervalued, but the current P/E of 29.5x tells a tougher story. It sits above the estimated fair ratio of 23x, the US Interactive Media and Services average of 14.7x, and peers at 15x, which suggests less room for error if growth or margins disappoint. Which signal do you treat as the anchor?

Next Steps

If this mix of pressure and potential around Tripadvisor leaves you on the fence, now is a good time to weigh the full picture for yourself. You can start with 3 key rewards and 2 important warning signs.

Looking for more investment ideas?

If you stop at Tripadvisor, you could miss some of the most compelling setups on your radar, so keep pushing your research and widen the opportunity set.

• Target potential mispricings by running through our list of 54 high quality undervalued stocks that pair stronger fundamentals with what may be more modest expectations baked into current prices.
• Secure your income stream by scanning 15 dividend fortresses that focus on higher yielding names where balance sheets and cash flows are front and center.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.