Billionaire Stephen Mandel Up to 5% of Tripadvisor

The closest peers for Tripadvisor are Priceline and Expedia. These stocks both carry trailing P/Es of 23. Priceline reported double-digit revenue and earnings growth last quarter versus a year earlier, including a 27% growth rate on the bottom line, and it might be considered for “growth at a reasonable price.” Expedia’s earnings are down from a year ago but that would be expected as Tripadvisor’s business had been included in its Q3 2011 results. Kayak would be a good comp if it wasn’t currently a Priceline acquisition target, but we can instead compare Tripadvisor to Chinese tour company Ctrip.com International, Ltd. (NASDAQ:CTRP). Ctrip trades at 27 times earnings, whether we look at trailing results or at consensus for 2013, and considering that its earnings were down 40% in its most recent quarter compared to the same period in the previous year we would avoid it.

It’s also interesting to compare Tripadvisor to another reviews company- local business reviewer Yelp Inc (NYSE:YELP). Yelp is struggling with profitability, and only 2 cents of EPS are expected next year. The market cap is $1.2 billion, and it is a very popular short, but revenue at least has been up strongly. We don’t think it’s a good value, but the risk of Yelp being acquired is too high for us to recommend a short here.

Tripadvisor seems a bit expensive to us- perhaps not as expensive as some similar companies, but earnings would need to come up quite a bit to justify the current valuation and recent growth rates haven’t been particularly high. Priceline, and possibly Expedia, seem like better places to look for travel stocks.