Tripadvisor Inc (TRIP), Expedia Inc (EXPE): Three Reasons Why This Stock Is on the Rise

Tripadvisor Inc (NASDAQ:TRIP) is the world’s largest travel site and operates in 30 countries, having trusted reviews from global travelers. It has gradually become the one stop portal for all travel needs and has developed a strong brand image. In this article, I will enumerate the reasons why I believe this stock is on the rise and will eventually outperform its peers.

Tripadvisor Inc (NASDAQ:TRIP)

Impressive Q1 results

In Q1 2013, Tripadvisor Inc (NASDAQ:TRIP) beat both top and bottom line estimates. EPS was higher than expectations at $0.39 million, which is 23% higher than the same period last year. Revenue and operating cash flow were also strong. This is despite the travel and vacation industry normally being a little stagnant in the first quarter of a year. Click-based advertising for Tripadvisor Inc (NASDAQ:TRIP) comprised 78% of the total revenue, at $180 million. The factors behind the growth of this stock are:-

1. One major revenue driver is the growth in Facebook Inc (NASDAQ:FB) usage with more than 33 million monthly users counting TripAdvisor as the most trusted travel app on the social networking site. Add to this the rapid international expansion taking place. TripAdvisor generates 60% of its revenue outside the U.S. with the Asia Pacific region being the fastest, registering a staggering 75% growth.

The company tries to make a mark in the local markets by incorporating local languages and content. Moreover, according to statistics, over 50% of Tripadvisor Inc (NASDAQ:TRIP) users search for hotels along with travel locations. The international hotel industry offers better growth opportunities than in the U.S. where it has become quite saturated. This is a plus point for TripAdvisor’s growth in international locations.

2. The mobile platform is another key growth driver for TripAdvisor. The number of downloads of the travel app is close to 36 million and the company has witnessed an increase of 300% in monthly unique mobile device visitors. The travel app popularity on both the tablet and smartphone is growing pretty fast. Tripadvisor Inc (NASDAQ:TRIP) is devoting more time and money to optimize the meta experience on both the channels. Moreover, the new Samsung Galaxy S4 is coming pre-loaded with the travel website’s app, making it one of the first of its kind. This means that TripAdvisor has an instant access to a huge market of Samsung.

3.
Meta display — the next big thing

In Q4 2012, Tripadvisor Inc (NASDAQ:TRIP) launched the meta display feature in smartphones. This functionality helps integrate all the search query results on the main page. Hence, it is a more clean and user friendly interface, allowing users to check out all the travel and hotel listings along with the locations on a single page. Currently, this meta feature is used by 20% of the users and TripAdvisor is planning to launch it globally by the end of June. By doing this, it will lead to increased conversion rates and pricing gains, impacting revenue positively.

Competitors

Expedia Inc (NASDAQ:EXPE) reported higher than expected revenue of $1.1 billion in the first quarter, which represents a 24% jump. However, the company has to do something to slow down its negative trend in earnings. Currently, EPS is at $0.25 a share, down from $1.32 in the third quarter of 2012. Some of this bottom line loss was due to Hotwire, which witnessed usage drop owing to Hurricane Sandy. However, the acquisition of Trivago was a relief for Expedia Inc (NASDAQ:EXPE) as it expanded its reach, especially in the European market. Investors might want to wait for some more time to have a correct measure and effect of the acquisition.

The case of Orbitz Worldwide, Inc. (NYSE:OWW) is somewhat similar to Expedia Inc (NASDAQ:EXPE). Profit was down whereas revenue increased 7% to $203 million, above estimates. The partnership with American Express Travel has proved to be fruitful for Orbitz Worldwide, Inc. (NYSE:OWW), which contributes the most to the growth of its business lines. Investors should not ignore this stock which is growing fast through partnerships and acquisitions, and is finding ways to stay competitive.

Summary

To conclude, I believe that TripAdvisor will slowly outperform its peers in the travel industry within a short span of time. Even Priceline.com Inc (NASDAQ:PCLN) which has a greater market cap than TripAdvisor is not that popular outside the U.S. The transition to 100% meta display functionality is a good move for TripAdvisor according to me. In my opinion, the stock can easily rise much higher in the coming months.

The article 3 Reasons Why This Stock Is on the Rise originally appeared on Fool.com is written by Tanya Kanodia.

Tanya Kanodia has no position in any stocks mentioned. The Motley Fool recommends TripAdvisor. The Motley Fool owns shares of TripAdvisor. Tanya is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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