UBS’ Eric J. Sheridan reiterated Buy ratings for Expedia Inc EXPE and Priceline Group Inc PCLN, while saying that he was “incrementally more positive” on Neutral-rated Tripadvisor Inc TRIP. The price targets for Expedia and Priceline are at $145, $1,525, respectively. The price target for TripAdvisor has been raised from $68 to $69.
Commenting on the Instant Booking [IB] debate, analyst Eric Sheridan said that investors are concerned about moves to address leakage, or lost traffic conversion), in terms of travel research and conversion. TripAdvisor’s IB continues to be on the minds of all online travel investors, who consider this data for its impact on the company as well as the broader industry.
“While the transition continues to cause rev headwinds & deleverage in the medium-term, we see increased signs of TRIP’s monetization opportunity from “plugging the leak” – with two illustrative frameworks suggesting potential for ~10% upside to 2017 Street Click-based ad revs – conservatively showing overall hotel shopper conversion before 3%, which appears achievable to us,” Sheridan wrote.
The analyst added that TripAdvisor is likely to benefit from higher repeat/return visits and engagement, both of which are concepts that the Street seemed to be underappreciating.
Incrementally Positive
Mentioning that he was “incrementally more positive” on TripAdvisor, Sheridan said that its risk-reward had improved. Although there are medium-term headwinds to the 1H16 estimates, there is a “growing chance” of the company beating Street expectations in 2H16 and 2017, backed by increased IB supply, better repeat/return behavior, and improved conversion.
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