Newly Upgraded TripAdvisor Stock Has Room to Run

TRIP options are attractively priced at the moment

by Patrick Martin

Published on Jul 11, 2018 at 9:54 AM

TripAdvisor Inc (NASDAQ:TRIP) stock is up 2.6% to trade at $59.09 this morning, defying broad-market headwinds, after Barclays upgraded the travel name to "overweight" from "equal weight," while boosting its price target by $21 to $70 -- the highest among brokerages in coverage. The analyst at Barclays waxed optimistic on mobile traffic, monetization rates, and TRIP's revenue growth prospects.

On the charts, TripAdvisor stock has been red-hot in 2018, adding 71.5% and culminating in an annual high of $60.12 on June 19. The shares subsequently pulled back to their 30-day moving average, but are now back within striking distance of new-high territory.

The outperforming travel stock is incredibly underloved by analysts. Of the 22 brokerages covering TRIP, a shocking 21 rate it a "hold" or worse. Furthermore, TRIP's average 12-month price target of $46.04 represents a 21% discount to the stock's current perch. This indicates there is ample room aboard the bullish bandwagon, and a round of additional upgrades and price-target hikes could push TRIP shares even higher.

A continued short squeeze could also provide more tailwinds for the equity. Short interest fell by 15% in the most recent reporting period, yet the 18 million shares still sold short represent nearly 17% of TRIP's total available float. At the stock's average daily trading volume, it would take more than a week for shorts to buy back their shares. 

What's more, an unwinding of skepticism in the options pits could also be a boon for TripAdvisor. The stock's Schaeffer's put/call open interest ratio (SOIR) sits at 1.72-- in the 89th percentile of its annual range. This indicates that near-term options traders have rarely been more put-biased on TRIP in the past year.

Traders looking to speculate on the stock's near-term price action may want to do so with options, which are attractively priced at the moment. TRIP's Schaeffer's Volatility Index (SVI) is docked at 33% -- in the third annual percentile, meaning premium on short-term options contracts is relatively cheap at the moment, from a volatility perspective.

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