Analysts Warn Investments May Hit TripAdvisor Results

Research firm Piper Jaffray downgraded TripAdvisor (TRIP) to Neutral from Overweight, citing its belief that the company may spend more on educating consumers going forward.

CUT TO HOLD AT PIPER: Although TripAdvisor can better monetize its “loyal and growing user base,” the company may have to increase its spending on educating consumers, warned Piper Jaffray analyst Michael Olson. Over the long-term, investing more in brand promotion would help TripAdvisor, though the move would lower its 2017 EBITDA and would probably also reduce its 2018 EBITDA, the analyst stated. He cut his price target on the shares to $47 from $60.

CUT TO SELL AT NEEDHAM: On February 28, Needham analyst Laura Martin downgraded TripAdvisor to Underperform, the firm’s equivalent of a sell rating, from Hold. The company is monetizing its mobile hits at just 33% the rate of its desktop traffic, and its efforts to transition to a booking engine has been more expensive than it had hoped, Martin believes. Moreover, its instant bookings business has been less profitable than it had expected, and its limited funds will prevent it from winning marketing wars with Priceline (PCLN) and Expedia (EXPE), warned Martin.

PRICE ACTION: In morning trading, TripAdvisor slid 0.7% at $41.18 per share.