TRIP...SunTrust: TripAdvisor In A Transitional Year, Story Shifts To Execution

• Shares of Tripadvisor Inc TRIP have been trending south in 2016, and are down 28 percent since January 4.
• SunTrust Robinson Humphrey’s Robert S. Peck maintained a Neutral rating on the company, while lowering the price target from $80 to $75.
• Peck expects 2016 to be a transition year, with the company’s performance being driven by the roll out of Instant Booking (IB) and the conversion trajectory.

TripAdvisor’s 4Q organic revenues, excluding acquisitions, were up 12 percent year on year, ex FX, as compared to a 21 percent increase in 3Q and 25 percent increase in 2Q. The revenues of the core hotels segment were up 8 percent, ex FX, with the slowdown in growth due to IB transition.

The company’s guidance for 2016 calls for muted hotel growth, with the weakness in 1H16 improving on easing comps and better IB conversions in the second half. The contraction in hotel EBITDA margins witnessed in 2015 is expected to continue in 2016 as well.

Related Link: Goldman Sees "Peak Travel," Downgrades Priceline To Neutral, TripAdvisors To Sell

Analyst Robert Peck mentioned that the company expects IB to result in “higher repeat bookings, better mobile monetization and reduced leakage.”

The analyst believes that the combination of improving mobile and IB conversions may provide a tailwind to growth in 2017, in addition to easier 1H16 comps.

The revenue and EBITDA estimates for 2016 have been reduced from $1.673 million to $1.623 million and from $513 million to $469 million, to reflect the impact of accelerated IB roll out and CPC pressures.