TripAdvisor: Closing the Loop

10/30/2015 8:00 am EST

Focus: STOCKS

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

During the past decade, there have been many growth stocks that have had two or three lives as they ride new products or services to greater heights, suggests Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

TripAdvisor (TRIP) could be the next in line. The company is the most popular travel information Web site, with 375 million unique visitors coming to read (and write) some of the firm’s 250 million reviews and opinions on more than five million restaurants, accommodations, and attractions.

The monetization of those visitors via advertising has been the big growth engine (revenues up from $352 million in 2009 to $1.2 billion last year) and that remains a strong area today; revenue growth should remain north of 20% based on advertising alone.

But the next let of the growth story could come from the company’s Instant Booking initiative, which closes the loop by allowing visitors to actually make a reservation right from TripAdvisor’s site, using third party infrastructure.

The initiative is now gaining steam, Marriott (MAR) signed on in the second quarter and Priceline (PCLN) also joined the program, which was seen as a huge show of support. And now, Wyndham (WYN) joined too.

Already, the firm’s non-advertising revenues have grown to 24% of the pie (from 16% a year ago) and investors see much more of that ahead, analysts expect earnings growth to reaccelerate next year and grow strongly for years to come. We’re intrigued.

TRIP had a big run from around $45 in early 2013 to $110 in March 2014. But then spending went up, earnings growth cooled off and the stock fell to $66 earlier this year.

After a bounce (spurred on by the deal with Marriott), TRIP fell with the market this summer…but then soared on nearly 10 times average volume on the Priceline news.

It’s not a pure uptrend, but we’re okay with nibbling here and seeing how the stock reacts to earnings on November 5.

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