TripAdvisor Shares Fell More than 3% after Downgrade

Cowen downgraded TripAdvisor

On March 6, TripAdvisor (TRIP) shares fell more than 3%. Cowen slammed the online travel agency with a bear note. The firm downgraded its rating on the stock to “underperform” from “market perform” and lowered its target price by $10 to $40, according to CNBC.

TripAdvisor Shares Fell More than 3% after Downgrade

In a note to clients, Cowen analyst Kevin Kopelman said that the company’s weak start in 2019 and slowing unique visitor count growth hadn’t been reflected yet in the share price. Last month, TripAdvisor reported dismal bottom-line results for the fourth quarter. The company’s adjusted EPS of $0.27 for the quarter fell short of analysts’ consensus estimate of $0.30. During the quarter, the unique visitors rose 2% YoY, which was much lower than the 8% growth it registered in the third quarter.

Kopelman also cited rising competition from Alphabet (GOOGL) as a key reason for his rating downgrade on TripAdvisor. For the past few years, Alphabet has been aggressively enhancing its own travel products. Looking at its size and advertisement capabilities, Alphabet is a threat to every online travel booking company (IYW).

Kopelman is cautious about TripAdvisor’s growth prospects. Expedia (EXPE) and Booking Holdings (BKNG) cited weakness in the European market during their latest quarterly results. Kopelman expects TripAdvisor’s profit growth to slow to the single digits by 2020.

Analysts’ lower target price

Since January, the analysts polled by Reuters have reduced their consensus target price on TripAdvisor. Currently, analysts have given the stock a target price of $56.33, which is 2.7% lower than the target price of $57.88 on January 7.

TripAdvisor has a mean rating of ~3.24 from the analysts polled by Reuters. The analysts have a consensus “hold” opinion on the stock. The “hold” recommendations represent 68% of the 25 analysts covering the stock. Six of the 25 analysts recommended a “strong sell” or “sell,” while two analysts recommended a “buy.”