Marketing Efficiency, Revenue Growth Key for TripAdvisor

Dan Wasiolek: We see two key takeaways for investors from TripAdvisor's positive fourth-quarter results. The first is marketing efficiency and the second is a stabilization in revenue growth. During the quarter, TripAdvisor saw over 400 basis points of marketing leverage driven by improved data analytics that allowed the company to identify and eliminate unprofitable marketing channels. We think this can continue to be a driver through 2018.

Despite the lower marketing costs, TripAdvisor saw stabilization in its sales growth, with revenue growing 2% in the quarter above our forecast calling for 2% decline, aided by a new user interface and TV campaign, both of which launched last summer. These initiatives, along with the company's intact network effect, should position the company, in our opinion, to reaccelerate revenue growth to a low-double-digit level starting in 2019.

Although the share price has moved up in response to the report, shares still trade at a discount to our fair value, leaving an opportunity for investors to own a high quality name at a discount.