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Bear of the Day: TripAdvisor (TRIP)

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TripAdvisor (TRIP - Free Report) isa popular online travel research company. The Company features reviews and advice on hotels, resorts, flights, vacation rentals, vacation packages, and travel guides. The sites operate in many countries worldwide, including China under The company operates through two segments, Hotel and Other. The stock is the Bear of the Day after it recently became a Zacks Rank #5 (Strong Sell) because of falling estimates after a poor earnings in early May

TripAdvisor has a market cap of $10 Billion with a Forward PE of 53. This high valuation is a big issue, which gives the stock a Zacks Style Score of “F” in Value. In addition, the stock has a score of “F” in Momentum, “C” in Growth and a VGM score of “F”.

The company sits in an industry ranked 226 out of 265 (Bottom 15%) of the Zacks Industry Rank. The latest quarter the company missed big on earning and estimate revisions are showing the company is struggling to maintain growth that would justify the high valuation.

Moreover, TripAdvisor is part of a growing online travel market that is becoming a bit saturated as threats form bigger companies. Facebook and Google are now talking about entering the OTA space, which would no doubt include travel research that would cut into TripAdvisor’s market share


The company reported Q1 earnings on May 4th, with EPS coming in at $0.32 verse the $0.46 expected. Revenue came in weak as well with only $352 Million coming in verse the $369 Million expected.  Adjusted EBITDA margin fell from 35% to 24.1% year over year.

 The stock has grinded higher since EPS, but that is more likely due to market strength rather than fundamental buying. The stock has been stuck in a trading range between $68 and $60 since the end of February and investors would be wise to sell here while it’s at the top of that range. Furthermore, if the stock falls to the lower end of the range again, look for it to break as estimates continue to be lowered.

Estimates Revisions

TripAdvisor has seen estimates fall over the last month, a sign that analysts expect last quarter’s issues to continue. For the current year estimates have fallen 16.5% from $1.48 to $1.27. For fiscal year 2017, estimates have been taken down 13.5% to $1.70 from $1.93.

The Facebook Threat

On May 18thExpedia’s(EXPE - Free Report) CEO said he expected Facebook(FB - Free Report) to develop its own online travel product, similar to the push Google(GOOGL - Free Report) has made. This would undoubtedly hurt the already saturated OTA market, and effect TRIPs top and bottom line.

A Better Option

If you’re looking at the Internet commerce space look to Petmed Express ,a Zacks Rank #1(Buy) that is America’slargest pet pharmacy. The company was featured in today’s Bull of the Day article after it was recently added as a #1.

Petmed is based in Pompano Beach, FL and has 178 fulltime employees. The company has a market cap of $380 Million with a Forward PE of 18. The stock pays a dividend of 4.07% and sports Zacks Styles Scores of “B” in Value and “A” in Momentum.

The stock looks poised to break $20.00 once again and head back to its 52 weeks highs.

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