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Sunny Outlook for Undervalued TripAdvisor

Dan Wasiolek

Dan Wasiolek: Most people recognize TripAdvisor for its 535 million travel reviews, but the company's platform offers so much more, with the most attractions and bookable restaurants, as well as a leading presence in accommodations. In turn, this dominant supply of travel content generates leading traffic to its platform, resulting in a powerful network effect, source of its narrow-moat rating. We portend that the company's network advantage, along with recent initiatives, will lead to a sales acceleration of high-single-digit and low-double-digit annual growth in 2017 and the next five years, respectively, from the 1% drop witnessed in 2016, as headwinds from its Instant Booking initiative abate.

We expect the company to see improving conversion on its leading network the next 10 years for several reasons. Instant Book now has supply from all the top hotels and online travel agencies, providing relevant content and attractive pricing for shoppers. Further, TripAdvisor is now displaying this content more efficiently, emphasized only to those with past interest in the feature, thereby aiding the user experience. Additionally, a new website user interface and TV campaign launched this summer should aid user awareness and satisfaction, leading to improved monetization over time. 

With shares trading at a discount to our fair value estimate, we see the stock as attractive for long-term investors.