New Trade: Long TripAdvisor ($TRIP) & Short Adobe Systems ($ADBE)

By: ispeculatornew
Date posted: 02.17.2014 (3:00 am) | Write a Comment  (4 Comments)

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I’m still far from my 7 live positions and while I continue to work on this, I ended up closing 2 trades on Friday morning so I guess I’ll have to wait a bit longer. I can’t complain though as returns have been very solid so far and while the year is still (very) young, I will appreciate it while it lasts.

As will be the case all year, my long & short stock picks will be available to see in my live spreadsheet:

http://www.intelligentspeculator.net/livetrades

You can see the numbers for both companies involved in today’s trade here:

TickerNamePricePE RatioPE Next YearSales GrowthAnalyst ratingBook ValueRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg GrowthSales 5Y Avg GrowthEPS 5Y Avg Growth
ADBEAdobe Systems Inc68.34115.1632.83-7.913.9613.558.094.11N/A4.11N/A
TRIPTripAdvisor Inc91.2565.4634.0123.813.546.086.61N/AN/AN/AN/A

It could seem pointless to look at 5 year numbers when one of the stocks turned public just last year but I think it’s important to see how poorly Adobe is fairing in this new era of software so having these 2 companies trading at nearly the same forward P/E seems like a no-brainer for me, don’t you think?

TRIP Revenue (Quarterly YoY Growth) Chart

TRIP Revenue (Quarterly YoY Growth) data by YCharts

$TRIPLong TripAdvisor (TRIP)

Last week, I got a very good question about one of my recent trades. Specially, why I had picked Priceline (PCLN) instead of TRIP even though TRIP is clearly a superior stock in my 2014 Power Rankings? I explained why but as TRIP announced its results, I can’t help but feel like I missed on an opportunity. Why buy a stock now that I could have gotten 10% cheaper just a few days ago? I guess there are 2 main reasons. First is that this one fits very well in a trade vs ADBE as they have very close P/E’s. The second is that TRIP impressed me not only because of their numbers but also the earnings call. I continue to be a strong believer in what they’re doing, their very long term vision and I guess you could argue that TRIP is building its own ecosystem which is very impressive. Its target audience is a few billion travelers and a few million travel-related businesses (hotels, resorts, etc), not bad right? I will be without a doubt be writing more about TRIP but for now I’ll simply say that it is a buy at these levels.

TRIP

Next earnings release: May 2nd 2014

$ADBEShort Adobe (ADBE)

Adobe’s stock has done very well in the past year. That is despite declining revenues and profits but also product screw ups (security issues), a lacking strategy and many different questions regarding its futures. It does still have amazing products but those are facing stiff competition and I don’t see what could possibly justify its current valuation. To give you an idea, in its last 4 quarters, ADBE’s top diluted earnings per share were $0.16. In the previous 6 quarters, the worst performance was $0.37…!

ADBE

Next earnings release: March 18 2014

Disclaimer: No positions on TripAdvisor (TRIP) or Adobe (ADBE) but I will initiate the trade on the open today

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4 Comments

  1. Comment by Johan Lindén — February 18, 2014 @ 4:56 am

    What were the most interesting things from the conference call? Can you sum it up, or link to a summarized version?

    Thanks!

  2. Comment by IS — February 18, 2014 @ 7:15 pm

    @Johan – Ha…! How to summarize! Can you give me a week? I’ll try to write a post about TRIP very soon giving more details about my thoughts, etc.

  3. Comment by Johan Lindén — February 19, 2014 @ 3:56 pm

    Ok thanks! I tried to search the web for some analysis from the CC but without luck.

  4. Comment by Johan Lindén — March 10, 2014 @ 7:32 pm

    I’m a little bit reluctant to short ADBE since they might be an alternative case to the 3D printing business. This in contrast to 3D Systems (DDD) which I currently short because of the hype and competition.

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