TripAdvisor Is Piper Jaffray's Top Pick For '16

• Tripadvisor Inc TRIP shares are up 10 percent year-to-date, despite having plunged from above $93 on July 23 to below $63 on September 28.
• Piper Jaffray’s Michael J. Olson maintained an Overweight rating on the company, while raising its price target from $90 to $120.
• Olson said that there is increased optimism regarding the potential impact of Instant Book to the company’s 2017 revenue.

“TRIP is our 2016 Top Pick and we are raising our price target to $120 to reflect our confidence in the potential Instant Book impact to 2017 revenue,” analyst Michael Olson wrote.

There have been heightened concerns around the long-term Instant Book model, following its near-term dilution to TripAdvisor’s revenue. Street expectations reflect relatively consistent revenue growth in 2016 and 2017 of around 15 percent. Olson commented, however, that Instant Book's impact could result in revenue growth of more than 25 percent in 2017.

The analyst mentioned that this could be driven by:

1. Take rate dilution is likely to reverse, as Instant Book supplier competition intensifies. This would bring monetization rates back to or above metasearch levels
2. Fractional improvements in conversion are expected to result in significant incremental revenue
3. An expected increase in TripAdvisor's relevance in the online travel ecosystem

“Moreover, TripAdvisor has been making strides towards monetizing the 50% of its traffic that visits its sites for restaurant and tours & attractions content,” the Piper Jaffray report stated.