New Trade: Long TripAdvisor ($TRIP) & Short Pandora ($P)

By: ispeculatornew
Date posted: 02.17.2015 (3:00 am) | Write a Comment  (0 Comments)

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The last few days were not as great with Travelzoo (one of my short positions) rising a bit but the 6.27% return so far this year remains very solid. Today I’m opening a new trade between 2 stocks trading at comparable levels but that I have extremely different longer term views about.

As is always the case you can see my long & short trades (from 2015 but also past years) here:

Let’s start off by looking at the numbers for today’s trade, two high priced stocks:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg GrowthSales 5Y Avg GrowthEPS 5Y Avg Growth
PPandora Media Inc15.44N/A27.5-15.9344.3542.791.414.49N/AN/AN/AN/A
TRIPTripAdvisor Inc84.8152.8227.9310.3731.93.368.651.558.7129.4N/A31.39N/A

The chart that I always look at is below and this time, it “could” indicate that Pandora is a better buy given comparable forward valuations but the big difference is that I think Pandora’s margins will remain extremely low over time so it would need a much bigger lead in order to justify its current valuation.

TRIP Revenue (Quarterly YoY Growth) Chart

TRIP Revenue (Quarterly YoY Growth) data by YCharts

$TRIPLong TripAdvisor Inc. (TRIP)

No surprise that I’m buying TRIP again. I had closed an existing long position a week ago before the earnings and thus end up losing on a (very) big gain following the earnings release but overall, I think TRIP will continue to do extremely well and feel very comfortable holding it at these levels. I see very few if any threats to TripAdvisor. Its biggest online travel competitors are trying to expand but they’re not competing on TRIP’s “core offer” of online reviews & ratings. Priceline buying Kayak and Expedia buying Orbitz are good moves but pose no threat to TRIP in my opinion.


Next earnings release: May 6th 2015

$PShort Pandora Media Inc. (P)

Ah looking at the below chart is sad in a way. Why? I’ve been short Pandora over and over in the past few months but I still managed to miss out on much of Pandora’s decline, especially in the last month. I fear that I’m repeating myself but the bulk of my belief is that Pandora has a terrific service but is going against formidable competitors such as Spotify but also others like Apple, Google and Amazon that are willing to lose money over the long term in order to make their “ecosystems” more attractive. That is a big problem and as smart cars expand, it will become increasingly easy to access those competing services. I just don’t see how Pandora will be able to build a solid long term business and can’t possibly justify its current valuation.

ycharts_chart (1)

Next earnings release: April 24th 2015

Disclaimer: Long position on TripAdvisor (TRIP) and I will open this trade on today’s open

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