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TheStreet Open House

Why TripAdvisor (TRIP) Was Upgraded

Story updated at 9:45 a.m. to reflect market changes.

NEW YORK (TheStreet) -- TripAdvisor (TRIP) was upgraded to "outperform" from "underperform" by RBC Capital Wednesday.

TripAdvisort gained 7% to $90.08 in morning trading.

The firm set a price target of $95 for the Internet company, up from the previous $68. Analyst Mark Mahaney wrote the upgrade is due to positive fourth quarter results and a "robust" 2014 outlook. Mahaney expects the company to see accelerating growth in click-based ad revenue soon.

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Separately, TheStreet Ratings team rates TRIPADVISOR INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TRIPADVISOR INC (TRIP) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TRIP's revenue growth has slightly outpaced the industry average of 15.3%. Since the same quarter one year prior, revenues rose by 19.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, TRIP has a quick ratio of 2.45, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to its closing price of one year ago, TRIP's share price has jumped by 64.12%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TRIP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has significantly increased by 89.70% to $145.04 million when compared to the same quarter last year. In addition, TRIPADVISOR INC has also vastly surpassed the industry average cash flow growth rate of 7.91%.
  • The gross profit margin for TRIPADVISOR INC is currently very high, coming in at 97.96%. Regardless of TRIP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TRIP's net profit margin of 21.90% significantly outperformed against the industry.
  • You can view the full analysis from the report here: TRIP Ratings Report
 

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