New Trade: Long TripAdvisor ($TRIP) & Short Travelzoo ($TZOO)

By: ispeculatornew
Date posted: 07.28.2014 (3:00 am) | Write a Comment  (0 Comments)

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Many more interesting earnings will be released this week. The one I’m most looking forward to at this point is Twitter’s (TWTR). I could be making my first “long term speculative pick” of the year in the 1-2 coming weeks and both TripAdvisor (TRIP) and Twitter (TWTR) remain the most likely options. It all depends on how things play out I guess:) Otherwise, it was a great week for my picks again, mostly thanks to Facebook which shot up as I wrote about on Thursday.The long & short portfolio now stands at +33,28% so far this year.

You can also see my long & short trades here:

http://www.intelligentspeculator.net/livetrades

Today’s trade features two of the bigger internet travel plays and while one trades at a much higher P/E, I’m convinced that buying it remains the no-brainer pick here. Part of the story here can be told by simple chart that features revenue growth. First let’s look at the numbers for both stocks:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaEarningsRevenue/ShareSales 5Y Avg GrowthSales 5Y Avg GrowthEPS 5Y Avg Growth
TZOOTravelzoo Inc17.5215.8417.42-18.294.673.672.640.7210/17/201410.369.6911.7717.82
TRIPTripAdvisor Inc99.8869.1736.6422.323.813.547.191.3310/23/20146.6129.3531.39N/A

TZOO Revenue (Quarterly YoY Growth) Chart

TZOO Revenue (Quarterly YoY Growth) data by YCharts

$TRIPLong TripAdvisor (TRIP)

TripAdvisor is one of my top picks in this market when I look at the upside vs. downside. I had been waiting for an opportunity to buy TRIP for a while and its decline following a disappointing earnings release last week might be just what I’m looking for to buy a more significant stake in the company as discussed here just recently. My biggest argument for supporting TRIP is that it has such a unique community and becomes extremely difficult to compete with. Most other plays (Priceline, Hotwire, Expedia, etc) compete mostly on ease of use, overall offering and prices. TRIP has millions of comments that make it possible to give its users a unique perspective. I think that will continue to be extremely valuable and I don’t see anyone close to competing there. I do expect that just like Facebook, TRIP will eventually move far beyond advertising and build strong relationships with the tens of thousands of businesses that run hotels, restaurants or other travel-related businesses. Thus, I personally think TRIP is an amazing (especially in the long term) buying opportunity here.

TRIP Chart

TRIP data by YCharts

Next earnings release: October 23rd 2014

$TZOOShort Travelzoo (TZOO)

Overall, I’ve been a fairly negative investor when it comes to Travelzoo. They do have an interesting business model but it’s fairly easy to compete with and as is the case with Groupon (GRPN), is losing steam fairly quickly. While they do have other interesting properties, their core remains that huge mailing list that they target with specific travel deals on a weekly basis. It has resulted in a significant slowdown in most of its metrics and won’t get any easier in the future in my opinion. So while it is trading at a much lower P/E than it was a couple of years ago, I still think it’s overvalued and will continue to suffer.

TZOO Chart

TZOO data by YCharts

Next earnings release: October 17th 2014

Disclaimer: No positions on TripAdvisor (TRIP) or Travelzoo (TZOO)

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