Ahead of the Bell: TripAdvisor upgraded to 'Buy'
NEW YORK (AP) — An extended share price decline at TripAdvisor makes the stock a good buy, according to Citigroup, especially because travel spending has remained stable despite the dismal global economy.
Citi's Mark Mahaney believes the stock, which is off 30 percent from a July 19th high, is positioned for an upward climb.
Shares rose nearly 3 percent in premarket trading.
There has been growing concern that travel data aggregators like TripAdvisor would be hurt by Google's entry into the space. TripAdvisor doesn't sell airline tickets or hotel rooms directly. Instead, it aggregates price information from a number of online travel agencies so people can compare.
Google began offering its own flight search after its acquisition of airline fare tracker ITA Software. Less than two weeks ago, Google said it was buying Frommer's travel guides to provide hotel and destination reviews, just like TripAdvisor.
Many feared that aggregators like TripAdvisor relied too heavily on Google to direct customers to their sites. Mahaney said that the risk for TripAdvisor is showing signs of moderating. Over the past 18 months, Google has declined from 36 percent to 28 percent of TripAdvisor's traffic.
And TripAdvisor is taking the right steps toward underscoring its role as an important marketing channel for online travel agencies, Mahaney said. Half of its revenue comes from Expedia and Priceline, Mahaney said. The company has recently made changes to balance the needs of consumers and advertisers, he said. While it has reduced pop-up windows and is providing more data and tools to advertisers, which could lead the company to lose advertising dollars in the near-term, Mahaney believes that the company is ultimately positioned up for more growth.
Mahaney believes the stock could grow to $44 within a year — a 31 percent increase from Thursday's close.
Shares of TripAdvisor Inc. rose 96 cents to $34.50 before the market opened.