Is TripAdvisor a Good Investment? This Hedge Fund Thinks So

TripAdvisor Inc (NASDAQ:TRIP) saw Luxor Capital Group increase its 2Q stake in the online travel company by over 100%, from 3 million shares at the end of June to 6.5 million shares, per a 13G filing at the end of September. Christian Leone founded Luxor Capital, a New York-based hedge fund, in 2002. Prior to purchase of the new shares, TripAdvisor already made up over 6% of Luxor’s 2Q 13F portfolio.

Christian Leone

TripAdvisor operates in a more niche market than some of its competitors. TripAdvisor is a site that focuses on reviews and helps facilitate travel booking, where key competitors, such as Expedia Inc (NASDAQ:EXPE), Orbitz Worldwide, Inc. (NYSE:OWW), Priceline.com Inc (NASDAQ:PCLN), and Kayak Software Corp (NASDAQ:KYAK) actually handle travel bookings. Orbitz has had a tough time so far this year, down 30% year to date and missing last quarter EPS by 20%. As well, the President of the Orbitz.com segment has made a number of insider sales around $2.80 over the past few months. Of the top online travel companies, Orbitz is definitely the most undersized at a market cap below $250 million. Orbitz, with its sub-$5 stock price and low market cap has attracted little fund interest; however, Par Capital, a fund with substantial interest in the travel industry owned 24.6 million shares.

Expedia is relatively flat since the TripAdvisor spin off. Expedia is still one of the largest online travel companies and includes other businesses, Hotels.com and Hotwire. The big worry for Expedia is its large exposure to Europe, in addition to the company’s European concerns over its lack of advertising without TripAdvisor. Expedia will likely see negative margin impacts from more advertising spending and technology innovation in 2012. As well as, they’ll probably see a less diverse revenue mix and more limited growth opportunities that puts this year’s EPS growth below 10%, versus the industry average of 24%.

Priceline is the behemoth of the industry, at a market cap of over $30 billion. The company expects to grow revenues by 19% in 2012 and 15% in 2013. However, much like Expedia, Priceline has significant exposure to Europe, where over half of Priceline’s gross bookings come from international business. Priceline’s exposure has only grown with recent acquisitions of Active Hotels and Bookings B.V., which are Internet hotel reservation service providers in Europe. Due to this European pressure, Priceline saw its price target lowered $50 to $700 by S&P; the company currently trades around $600 a share.

Kayak, the new comer to the travel industry with its summer-2012 IPO, is relatively flat since its NYSE debut. Although the company missed its first EPS estimate as a public company by 8%, the company is still expected to grow next year EPS by 35%. TSCHE Bank recently reiterated its buy rating on the company, with analyst Lloyd Walmsley citing that some of the weakness experienced by other online travel companies will be much different for Kayak given the company’s limited European exposure. In its most recent quarter, Kayak derived only 19% of revenues from Europe. However, our concern for Kayak’s current stock price is that the company trades at a high P/E ratio relative to the industry, at 50x trailing earnings.

Since TripAdvisor was spun off of Expedia in late 2011, the company is up 33%, but Luxor sees more upside, as do we—see our other thoughts on whether TripAdvisor is a good buy. We also believe that Expedia needed TripAdvisor more than TripAdvisor needed Expedia—see what hedge funds think of the travel industry. Other funds have also taken notice of TripAdvisor’s growth prospects. This includes Viking Global with 9 million shares and John Griffin with 5.6 million shares. Also, Philippe Laffont took an entirely new position in 2Q that was over 4 million shares. Although TripAdvisor trades above average on a P/E basis at 25, the company’s forward P/E is 18, as the company is expected to have a positive uptrend in EPS growth over the next five years, with an expected CAGR of 15%.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!