Tripadvisor Gets An Upgrade On Its Underappreciated Experiences Segment

Tripadvisor Inc TRIP is seeing an upgrade on its rapidly expanding "Experiences" segment.

The Analyst

SunTrust analyst Naved Khan upgraded from a Hold to a Buy rating and maintained his $60 price target.

The Thesis

Khan says Tripadvisor's expanding experiences segment now represents nearly a third of sales and a solid majority of the stock’s intrinsic value.

“Experiences has now reached critical mass, which coupled with stabilization in Core should help drive accelerating growth in overall top line in FY20 and beyond, in our view,” said Khan.

The focus on centering booking travel accommodations around experiences is a growing trend in online travel agencies and alternative accommodation platforms. Airbnb announced last week their own Experiences platform called "Adventures."

SunTrust says Tripadvisors’ Experiences segment generates 30% of revenues but is still underappreciated by investors due to its valuation. Khan says the Experiences segment could increase 3.5 times over the next five years under his base case.

“We believe that this fast growing segment has yet to be fully reflected in the stock’s valuation. This is understandable given the historical importance of hotels to TRIP and lack of public comps for Experiences,” he said.

Price Action

Tripadvisor shares are up 1.9%, trading at $47.22.

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