Tags: TRIP | TripAdvisor | Stock | Investing

David N. Frazier: Recent Sell-Off in TripAdvisor Presents a Favorable Buying Opportunity

By    |   Friday, 02 May 2014 07:30 AM

After rising to substantially over-priced levels from Feb. 12 to March 7, TripAdvisor (TRIP) fell considerably from March 10 to April 28.

Although TRIP rebound to $83.50 on May 1, from $75.13 on April 28, this week’s trading action in TRIP indicates that it will pull back a bit during the week ahead. However, some recent fundamental developments at the company suggest that its stock will trend higher during the coming months.

For example, TripAdvisor grew its revenues at year-over-year rates in excess of 25 percent during each of the past four quarters, as traffic at its Internet web sites rose at an even faster pace during those quarters.

For the quarter ended Dec. 31, 2014, traffic at TripAdvisor’s website rose by 50 percent, as compared to the same quarter a year ago. Those sites attracted more than 2 billion unique visitors during the year ended Dec. 31, 2013.

Although TripAdvisor also grew its net income at year-over-year rates exceeding 25 percent during the first two quarter of 2013, its profits declined during the third and fourth quarters of 2013 as the company spent heavily on sales and marketing activities in an effort to gain more exposure in the travel industry.

Looking forward, my research indicates that TripAdvisor will grow its net earnings per diluted share at an annual rate of around 30 percent during the next few years. With the Needham, Massachusetts-based company’s stock closing on Thursday at a price-to-earnings multiple of only 29, TRIP therefore appears to be trading at a bargain price. The stock rose $2.76, or 3.42 percent, to close Thursday at $83.50 in Nasdaq trading.

Separately, the company announced on Thursday that it has acquired VacationHomeRentals.com, a Massachusetts-based vacation rentals website that features more than 14,000 properties in all 50 U.S. states and in 89 countries around the world.

Like its competitor, HomeAway (AWAY), VacationHomeRentals.com’s properties are fully furnished, privately-owned residential properties, including homes, condominiums, villas and cabins that can be rented on a nightly, weekly or monthly basis.

In light of the fact that an increasing number of leisure travelers are choosing to stay at the types of properties offered by VacationHomeRentals.com, I expect TripAdvisor’s acquisition of that company to add substantially to its bottom line over the next few years.

Relative to hotels, VacationHomeRentals.com provides travelers with compelling values and a wide range of travel lodging options that are tailored to those travelers’ unique needs. During 2013, more than nine million travelers relied on VacationHomeRentals.com for their trips.

That acquisition follows a similar acquisition that TripAdvisor made during May 2013, when it acquired Niumba, a leading vacation rentals website in Spain.

In case you’re not familiar with TripAdvisor, the company operates the world’s largest travel site, with 39 such sites and more than 550,000 rental properties around the world. Its sites help people to plan their trips according to their specific desires by giving them access to the reviews and opinions of millions of travelers who comprise the company’s online global community.

TripAdvisor aggregates reviews and opinions about destinations, accommodations, including hotels, Bed & Breakfast properties, specialty lodging and vacation rentals. It also provides reviews on restaurants and vacation activities throughout the world.

In addition, the company’s online platform enables people to book hotels, vacation rentals, airline tickets, vacation packages, destination services and cruises.

TripAdvisor is very strong financially, with its cash and marketable securities alone covering 79 percent of the company’s total financial obligations as of Dec. 31, 2013.

The company has, historically, generated very high profits per each dollar of sales, with it generating a net profit margin of 28.2 percent for the year ended Dec. 31, 2013. In comparison, the company’s competitors generated an average profit of only 11.5 percent during that period.

I would encourage stock market investors and speculators to allocate a portion of their financial market assets to TRIP at prices up to $85.

David N. Frazier has an extensive background in the investment securities industry and has invested in the financial markets for more than 25 years.

In addition to working as a business analyst, merchant banking analyst and equity research analyst, he’s held positions in sales and marketing at institutional investment firms, including William O’Neil & Co., TDAmeritrade, and Merrill Lynch.

David now serves as the President and Chief Market Strategist of Frazier & Mayer Research, LLC (dba www.TheMarketMonk.com), an independent investment research firm that provides research and analytical services to hedge funds, investment advisory firms, and other investment newsletters.

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TripAdvisor aggregates reviews and opinions about destinations, accommodations, including hotels, Bed & Breakfast properties, specialty lodging and vacation rentals. It also provides reviews on restaurants and vacation activities throughout the world.
TRIP, TripAdvisor, Stock, Investing
Friday, 02 May 2014 07:30 AM
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