Despite Headwinds, Cowen Sees TripAdvisor Travelling Higher Long-Term

Cowen’s Kevin Kopelman believes the Street is underestimating the pressure on Tripadvisor Inc TRIP during FY16, as well as the potential for a rebound in FY17.

Kopelman maintains a Market Perform rating on the company, while raising the price target from $65 to $70.

Favorable Setup

Following an analysis of the revenue per shopper, the analyst has lowered the estimate for greater Instant Book headwinds, bringing the revenue and EBITDA estimates below the consensus forecasts for FY16.

Related Link: Instant Book Will Create Stronger Long-Term Economics For TripAdvisor, Piper Jaffray Says

However, Kopelman expects a robust rebound in the flagship meta and Instant Book revenues, from a decline of 14 percent in 1H to flat in 2H and then 28 percent growth in FY17, significantly above the consensus expectations.

“The rollout of Instant Book, TripAdvisor's program to drive bookings directly on its own website, drove significant headwinds in Q1,” the analyst noted, mentioning that revenue per shopper fell 34 percent yea- on-year.

Q2 Better Than Q1

Although TripAdvisor is expected to benefit from more favorable FX and the elimination of a revenue timing shift in Q2 as compared to Q1, Kopelman expects this to be offset by the impact of the first full quarter of Instant Book being rolled out to key international markets.

“TripAdvisor has also continued to invest heavily in both its R&D platforms and marketing programs and will also be integrating the recent acquisition of HouseTrip, a small vacation rental company,” the analyst added.