It's been a tough week for TripAdvisor (Nasdaq: Journey) which declined at Friday's close by more than 30% from last week, as first-quarter results were affected by the company's decision to withdraw from the takeover dispute.
Disappointed investors were bailed out of shares, wiping out all the gains made when the company first formed a special committee to consider takeover offers. Potential suitors have lined up, including Apollo Global Management (APO). The committee later decided that a merger or acquisition was not in the best interests of the company and its shareholders, unleashing a feeding frenzy that pushed shares below their 100- and 200-day moving averages for the first time since November.
Wall Street analysts responded with a deluge of price target cuts from JPMorgan, Goldman Sachs, Barclays, Wedbush and UBS, among others, with the lowest price target of $15 (Barclays) accompanied by an Underweight rating.
DA Davidson downgraded TripAdvisor (TRIP) to Neutral from Buy, not just based on Q1 results, or even the company's decision to take itself out of the market, but based on what DA Davidson analyst Tom White considers a “slow start to Q2.” . White sees Google's search engine change combined with Easter timing headwinds this year holding core travel segment revenues slightly higher.
“Due in part to Q2 trends, TRIP is now taking a more cautious view on its full-year performance,” White said in his research report.
But not everyone is retreating to the sidelines. Some believe that the significant decline in the stock represents a buying opportunity.
“Although (the committee's decision on mergers and acquisitions) represents a huge loss for investors who owned TRIP shares as of Wednesday, for other investors like me, it is a tremendous opportunity to re-enter the trade. By clicking the buy button at the opening bell this morning.”
Fisher particularly likes Viator, TripAdvisor's day trip booking segment. As the company's “true growth engine,” Viator now accounts for nearly 50% of TripAdvisor's revenue.
On the company's earnings call, CEO Matt Goldberg highlighted the company's expanded use of AI-based hotel review summaries and the use of AI to enhance trip planning.
“We see that users who choose one of these commerce-focused interests generate 50% higher average revenue than users who don't, which provides a great indication of our ability to generate and monetize incremental demand as users move through the journey,” Goldberg said.
“What you're seeing is — and when we say balanced growth, profitability and market share, we really mean it. We're in this for the long term,” Goldberg said.
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