Expedia, TripAdvisor fall more than 20% after blaming poor earnings on decrease in Google search results

A mascot of TripAdvisor is seen at its display at a trade fair.

Axel Schmidt | Reuters

Shares of Expedia and TripAdvisor both reached new year-to-date lows during midday trading on Thursday, tumbling as much as 25%.

The stock plunge comes after both the travel service stocks reported third-quarter earnings misses after the bell Wednesday. Both companies pointed to weakened visibility in Google search results as a long-term revenue headwind.

Expedia reported earnings of $3.38 per share excluding certain items on revenue of $3.56 billion, falling short of the $3.80 in earnings per share and revenue of $3.58 billion that analysts expected, according to Refinitiv. Expedia's gross bookings also came in just shy of estimates, coming at $26.93 billion versus the $27.06 billion expected.

Changes in Google's search algorithm has lessened visibility on search results, resulting in a heavier reliance on paid advertising, CFO Alan Pickerill explained during the company's earnings call.

Challenges can be felt "across multiple product categories and multiple regions" and that moving to paid links presents "a sizable headwind" for the company, he said.

Weaker revenue growth in the company's home rental platform Vrbo and a revenue decline in Trivago also compounded Expedia's earnings miss, according to a Needham analyst note. Vrbo's revenue grew by 14%, compared to its 17% growth last quarter.

Expedia cut its full year EBITDA outlook range to between 5% and 8% from its previous range of 12% to 15%.

TripAdvisor, meanwhile, posted third-quarter earnings of 58 cents per share on revenue of $428 million, while analysts expected an earnings per share of 69 cents and revenue of $459 million, according to Refinitiv consensus estimates.

That revenue represented a 7% year-over-year decline for the company.

During Thursday morning's earnings call, TripAdvisor President and CEO Stephen Kaufer highlighted the company's strategy of diversifying hotels, management and platform revenue away from Internet search headwinds.

Kaufer did not disclose the company's search exposure as a percentage of overall trip revenue, but said it is a "significant minority" of the company's auction and revenue.

Expedia's shares are down more than 10% year-to-date, while TripAdvisor's shares are down about 42% year-to-date.

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