TripAdvisor's Risk/Reward Might Be Its Most Redeeming Quality; Piper Jaffray Is Overweight

• TripAdvisor Inc TRIP shares have plummeted 20 percent in the last three months, declining steadily after reaching a high of $93.37 on July 23.
• Piper Jaffray’s Michael J. Olson maintained an Overweight rating on the company, with a price target of $95.
• Following the recent pressure on TripAdvisor’s shares, the risk/reward appears favorable, Olson said, adding that checks indicated IB traction.

TripAdvisor’s shares have lost about 25 percent since the company reported lackluster 2Q results and reduced its full-year guidance to reflect soft international CPCs. This compares with a 5 percent decline in the S&P 500 during the same period.

Analyst Michael Olson believes that the underperformance has created “an attractive entry point for long term investors.”

Noting that TripAdvisor is the world’s largest travel website, with about 2.5b unique visitors per annum, Olson said that the company is expected to “improve monetization, diversify product lines and gain a stronger economic position in the online travel value chain.”

“Our checks at 500 of TripAdvisor's highly rated hotels worldwide shows that Instant Book continues to gain traction where it counts,” Olson wrote. By the end of the second quarter, a third of the eCommerce enabled hotels were live on Instant Book.

This indicates that “direct relationships with hotels, using internet booking engines (IBEs) to get traction with small hotels, and mid-sized OTAs are augmenting the absence of Priceline and Expedia's inventory,” the analyst explained.

In view of the positive checks and the incoming of a new CFO, shares could be boosted by “improved clarity and visibility,” the Piper Jaffray report stated.