New Trade: Long Tripadvisor ($TRIP) & Short Yelp ($YELP)

By: ispeculatornew
Date posted: 03.07.2016 (3:00 am) | Write a Comment  (0 Comments)

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Today I am opening my 8th trade of the year between 2 stocks that trade at similar P/E ratios and have a “somewhat” similar business model. As is always the case you can see the existing live trades here:

http://www.intelligentspeculator.net/livetrades

Let’s start off by looking at the numbers:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
TRIPTripAdvisor Inc65.5751.0626.53-23.3819.743.089.721.5110.3624.16N/A
YELPYelp Inc21.75N/A26.7-26.3945.63.549.191.267.3659.08N/A

I usually go for the stock that seems to be underpriced relative to its revenue growth but today I’m actually going for TRIP. I don’t believe the revenue comes close to explaining the story going on between the 2. The following Google Trends chart does give a bit more.

YELP_TRIP_chart

YELP_TRIP

 

Long Tripadvisor (TRIP)

I continue to be a long term believer in TRIP even though the stock has declined quite a bit since my long term speculative pick. Part of it of course is the overall tech sector decline in recent months but there has also been a clear cut between the “sure bets” that have been able to display top and bottom line growth and those that have not been able to tell such a story. TRIP has been a bit slow which I would argue is to be expected given its model. I do like the Instant Booking direction and the fact that several of the most important players (Priceline, Marriott, etc) have now signed up certainly speaks to its long term future. I think that will eventually mean significantly increased revenues per visitor but until that shift happens, TRIP will have trouble outpacing the market.

TRIP_chart

Next earnings: May 4th 2016

Short Yelp (YELP)

You might have believed that I not that optimistic about TRIP but I’d say that YELP is in similar but worse position. It faces much stronger competition (from the likes of Google, Tripadvisor, Priceline, etc) and I am very skeptical about YELP’s ability to keep up the growth in the next 1-2 years. I’m also less afraid of YELP being acquired than I’ve been in recent years making the risk vs. reward of shorting it better.

YELP_chart

 

Next earnings: April 27th

Disclaimer: This trade on TRIP-YELP will be done on today’s opening, I do have an existing long term speculative position on Tripadvisor (TRIP)
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