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Barclays Upgrades TripAdvisor’s Rating, Shares Rise 1.9%

Zacks

TripAdvisor, Inc. TRIP has been upgraded by Barclays’ analyst Deepak Mathivanan. The analyst upgraded TripAdvisor stock from an equalweight to overweight rating.

Also, he raised the target price by 43% to $70 on the stock, prompting an increase of 1.9% in share price.

Notably, the stock has outperformed the industry it belongs to over the past year. It has gained 57.1% compared with the industry’s rally of 43.1%.


Why the Upgrade?

The analyst believes that TripAdvisor is witnessing secular growth trends in the online travel space. The company’s monetization rates seem to be on track and should grow in the to-be-reported quarter. Improving user experience in both mobile and desktop is a big positive going forward.

Mathivanan said, “We expect TRIP’s mobile traffic to soon inflect from being a headwind to a tailwind on overall monetization rates, as mobile overtakes desktop in hotel shoppers sometime in early 2019."

In addition, Mathivanan remains positive about the company’s non-hotel segment. In the last reported quarter, revenues in the non-hotel segment increased 37% year over year and contributed to 21% of the total revenues. This segment includes revenues from attractions, restaurants and vacation rental businesses.

Conclusion

TripAdvisor’s growth is being driven by strong performance in the company’s non-hotel business, better cost control, improving monetization rates and favorable foreign currency. Its improvement in user growth and engagement can be accredited to growth initiatives like Meta search & Instant Booking, as well as strong focus on developing its mobile products.

Expansion into the international restaurant reservation space, solid fundamentals and boosting hotel bookings from partnerships are likely to help the company in achieving desired results.

Zacks Rank and Other Stocks to Consider

Currently, TripAdvisor sports a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the same industry include Groupon GRPN, IAC/InterActiveCorp IAC and Ctrip.com International, Ltd. CTRP. While Groupon and IAC/InterActiveCorp sport a Zacks Rank #1, Ctrip.com holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Groupon, IAC/InterActiveCorp and Ctrip.com is currently projected to be 6.5%, 7.5% and 16%, respectively.

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