Investing in the travel sector these days doesn’t mean just buying airline stocks. You can tap into a number of different options, including online travel platforms like TripAdvisor (NASDAQ: TRIP), which was one of the first travel guide and research websites.
TripAdvisor Company History and Stock Performance
TripAdvisor was founded in 2000 by a group led by Stephen Kaufer. The company had the bright idea of putting a button on its travel website that said, “Visitors add your own review,” which became the basis for the platform’s current model. Users now share their reviews and ratings on destinations, attractions and places to stay via the TripAdvisor platform, which also provides web portals to facilitate bookings.
In 2004, the company was bought by IAC/InterActiveCorp, which spun off the travel group business under the Expedia name in 2005. Expedia spun off TripAdvisor in December of 2011 through an initial public offering (IPO).
Immediately before the second spin-off, Expedia implemented a 1-for-2 reverse stock split, which means that for every 2 shares of Expedia, stockholders would effectively only own 1 share. The next day, Expedia shareholders were entitled to 1 share of Expedia and 1 share of TripAdvisor common stock for every share of Expedia owned.
Future Outlook for TripAdvisor
According to the company’s own internal log files for the 3rd quarter of 2018, TripAdvisor is the world’s largest travel platform. Over 490 million travelers consult the website every month. The platform provides travelers with information on 8.3 million travel-related establishments that include accommodations, airlines, cruises, restaurants and other unique travel experiences.
TripAdvisor encourages users to leave a review and gives them access to browse more than 760 million reviews and opinions of other users. The service is available in 49 markets and has been translated into 28 languages.
TripAdvisor is not a tour operator or booking agent and the platform does not charge any service fees to users of its website. The company instead relies on payments from airlines and other travel partners that offer services through the platform. TripAdvisor’s affiliates and subsidiaries also own and operate their own portfolio of 25 travel brands that can be accessed through the TripAdvisor platform.
TripAdvisor stock peaked in 2014 around the 110 level and then declined substantially, notably failing to rise along with the U.S. stock market’s subsequent rally to all-time highs. It has also been under pressure and has lost approximately -20% of its value since the beginning of this year to trade at just over $43 per share, which seems especially disappointing compared to the broad Standard & Poor’s (S&P) 500 Index’s gain of +15% during the same period.
One reason for the recent decline in TripAdvisor stock’s price has been the company’s unimpressive earnings in 2019. year. Its 2nd quarter earnings report was released August 7, 2019 and TripAdvisor reported quarterly earnings of $0.45 per share versus the $0.41 per share seen in the same quarter last year. It showed a modest rise but is below analysts’ consensus estimate of $0.52 per share and disappointed the market by -13%. By 2022, its stocks were selling at $22.67.
The company’s earnings may eventually turn around when its business improves, but the current end of the business cycle looms and the general market’s recent selloff after another all-time high and a Fed benchmark rate cut means it may take some time. Recently, the company replaced its CEO.
The travel industry and its associated online companies like TripAdvisor could also decline as much — or even more — than the overall market if a sharp general selloff occurs. That expectation could also be in part behind TRIP stock’s significant decline this year.
Why You Might Want to Buy It
Here's are reasons that you might want to consider adding TRIP to your stock portfolio.
- Industry leader: TripAdvisor has led the industry for almost 2 decades. The company has also revolutionized the travel industry and it provides a service that few other companies can offer its customers with the same degree of success.
- Expectations of continued market gains: If you’re bullish on the stock market, then you might buy TRIP stock for its cyclical qualities. Cyclical stocks mirror stock market performance and typically rally along with the general market, although that has not recently been the case with TRIP.
- The stock recently traded at its yearly low: TRIP stock currently trades at the $22.67. The stock’s all-time high price of $110.21 occurred June 2014 and its 52-week high of $66.93 occurred in November 2019.
Considerations Before You Buy
Before you buy TRIP, here are a few things to take note of.
- Weakening economy, stock market decline: TRIP stock has already sold off considerably this year, although a decline in the general market could have more of an adverse effect on its price. The stock has already sold off significantly since the start of the year and additional signs of an economic slowdown will probably exacerbate selling pressure.
- Lower earnings: Earnings trending lower over the past few quarters does not bode well for TRIP stock. Increasing domestic and international geopolitical tensions may also have an adverse effect on the company’s prospects as people opt to stay home instead of travel.
- Limited upside without a dividend: As with other online-based companies that have seen astronomical growth over the last 20 years, TripAdvisor’s stock price has reached a level that might be difficult to maintain without the company paying a dividend, buying back its own stock or expanding its business. Long-term income-oriented investors will probably pass over this stock in favor of more attractive options.
How You Can Buy TripAdvisor Stock Right Now
You can buy TRIP stock right now by placing a bid on the amount of stock you want if you already have a trading account. Keep in mind that how you buy TripAdvisor stock is just as important as where you trade, so make sure you pick the right broker.
Step 1: Pick a Broker
You’ll need a trading account with a reputable stock broker to trade NASDAQ stocks. Know in advance what you will need from a stockbroker so you can easily make a choice.
For example, a broker like Interactive Brokers might suit your needs. Interactive Brokers supports its customers with a state-of-the-art trading platform known as the Trader Workstation (TWS) and provides access to more than 120 world markets.
You might opt for a broker like E*TRADE if you need banking services. E*TRADE also provides an easy-to-navigate trading platform and educational resources for less-experienced traders.
Step 2: Open Demo Accounts to Assess Brokers’ Platforms and Services
Open a demo or virtual account next. Many online brokers offer accounts that do not require a deposit. They can be extremely useful for assessing a broker’s trading platform and execution services and allow you to practice trading and test out a strategy.
Step 3: Make a Deposit and Fund your Account
You are now ready to fund your trading account. You might not be required to make an initial deposit but you will need enough funds to buy the amount of TRIP stock you want. Different brokers have varying methods clients can use for making deposits and withdrawals, so check to be sure your broker supports the method you prefer.
Step 4: Start Buying TRIP Stock
Consider performing some technical analysis and take a session to get a feel for how the stock trades so you can determine your optimum purchase price.
Place either a limit order away from the market that can be just for the day or a “good ‘til cancelled” (GTC) order. You can also buy the stock “at the market” to execute your purchase at the best price available at the time.
Is TripAdvisor Stock a Good Investment?
Are you bullish on the general stock market’s direction and think the U.S. business cycle might still have some upside? Buying TRIP stock could make sense for you. The stock just made its yearly low, which could also present a buying opportunity for the right value-oriented investor.
Buying TRIP stock might mean you’re jumping in too early in light of recent selling pressure if you think the market looks toppish. Holding cyclical stocks typically makes sense in an expanding economy, but not in a contracting one typified by a declining stock market.
Finally, consider the fact that the company has been at the forefront of the online travel business for 2 decades but still pays no dividend. The upside on the stock might well be limited. The main exception is that the company becomes a takeover target, although that seems unlikely right now.
Does Trip Advisor pay a dividend?
Trip advisor does not pay a dividend to its shareholders.
Why is Trip Advisor's stock down?
Trip Advisors stock is likely down for two reasons. First, the company announced that was replacing its CEO of 20 years. Also, the company missed expectations in the recent quarter.
Is Trip Advisor a buy or hold?
Trip Advisor currently has a consensues of hold. The consensues is made of of three ratings: 7 buy ratings; 12 hold ratings; and 4 sell ratings.
About Jay and Julie Hawk
During her financial career, Julie developed world-class expertise in technical analysis, including Elliott Wave Theory, and was deeply involved in initiating research into automated trading and trading signal systems. As a member of the San Francisco Writers’ Guild, Julie regularly wrote trade strategies, educational material, market commentary, foreign exchange newsletters, reports, articles and press releases. In addition, Julie was interviewed for various financial markets magazines and news wires in her professional capacity as a forex and derivatives expert. Since retiring from working at banks, Julie has been writing and editing books and articles about financial markets for companies like Benzinga, as well as trading forex online and mentoring other traders as part of TheFXperts’ financial team.
In addition to trading stock index, forex and commodity futures and options professionally on exchange floors, Jay also has experience trading stocks and options for private investors and trading forex online for his own account. He has also developed extensive experience in performing and using fundamental economic and corporate analysis to inform his trading and investment activities. Jay is also an expert financial writer with particular expertise in reviewing online brokers and investor services.