This Is A Major Long-Term Tailwind For TripAdvisor

• The share price of Tripadvisor Inc TRIP has appreciated 25.32 percent over the past one month, from a low of $66.315 on October 7.
• Piper Jaffray’s Michael J. Olson has reiterated an Overweight rating and price target of $90 on the company.
• Olson believes that the stock is an attractive option for long-term investors, given that Tripadvisor is well positioned to become a more meaningful travel booking tool over the next couple of years.

Analyst Michael Olson believes that although the increasing Instant Book traction could lead to some volatility in near term revenues, Tripadvisor “has never been better positioned to take advantage of its traffic.”

According to the Piper Jaffray report, the company’s “historical metasearch model restrained the company's ability to retain users inside its ecosystem through the booking process, which led to low conversion relative to other booking and eCommerce models.”

However, things have changed with the launch of Instant Book, with more users engaging with Tripadvisor not only as a booking site but also as a source of information.

“With >375M monthly unique users and ~3B+ annual unique users, small improvements in engagement can turn into meaningful additional monetized users,” the report mentioned.

On the other hand, while Priceline Group Inc PCLN has a negotiated base take rate of about 8 percent, hotels are rumored to have negotiated with Tripadvisor for rates below 10 percent, which means that the latter is generating less revenue per booking at present.

“We believe that Priceline's recent inclusion likely came at a monetization cost, but that this will be short-term and that there are significant levers that can counteract this impact,” Olson added.

Despite the near term uncertainty, Olson believes that the company has significant long term potential.