Bet on the Travel Industry with TripAdvisor Stock

TRIP is up 70% year-over-year

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Yesterday, travel company TripAdvisor, Inc. (NASDAQ:TRIP) signed a letter of intent to engage in a promotional collaboration with Atout France, the French tourism development agency leading the country's post-pandemic travel and hospitality recovery efforts. According to CEO of TripAdvisor, Stephen Kaufer, "This is only the beginning of our partnerships with tourism development agencies like Atout France, as we work with the world to reignite our collective passion for travel, and help build a more sustainable future for the French tourism industry as we, together, encourage more responsible travel practices that protect local communities and our planet."

Amid the Pfizer (PFE) news, travel and leisure stocks are enjoying breakout days, with TRIP last seen up 7.7% to trade at $34.99. The positive price action comes ahead of the company's third-quarter earnings report, due out on Monday, November 8. The stock has a history of making post-earnings moves to the downside; seven of the last eight post-earnings reactions have been negative. TRIP has averaged a post-earnings move of 5.2% -- regardless of direction -- the last two years. This time around, the options market is pricing in a larger-than-usual post-earnings swing of 9.2%.

TripAdvisor stock is up 21% in 2021, but sports a healthy 70% gain year-over-year. For the past four months though, the shares have traded in a tight range between $32 and $38. A short squeeze could help TRIP break out; a healthy 11% of the stock's total available float is sold short. At the stock's average pace of trading, it would take shorts almost six days to buy back their bearish bets. 

From a fundamental point of view, TripAdvisor stock doesn’t offer a high level of security as a long-term investment. Aside from TRIP's revenues dropping 61% and net income dropping $415 million in fiscal 2020 as a result of the COVID-19 pandemic, TripAdvisor's revenues also declined 3.5% in fiscal 2019.

However, TripAdvisor stock continues to demonstrate growth potential in the short term as the online travel company begins to see its top- and bottom-lines recover. This is reflected in TRIP’s forward price-earnings ratio of 18.02, which indicates a significant improvement in earnings after the company consistently posted unprofitable figures in 2020. Overall, TripAdvisor stock offers the most opportunity as a short-term recovery play as travel begins to pick up again.


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