With the exception of the occasional speculative spike, TripAdvisor has been a terrible investment for a dozen years now. Currently trading under $11 per share, the stock is down more than 90% from its all-time high of $111 reached in 2014. After such a long and deep decline, we can no longer talk about a comeback. A resurrection from the dead is what’s needed here. That’s a big ask, however, and success is far from guaranteed. The question is, can TripAdvisor do it? Some encouraging signs have been appearing recently.
For example, the company is selling one of its divisions, TheFork, to American Express for $700 million. It intends to use the proceeds to repurchase stock, pay down debt and invest in growth initiatives. The legacy part of the company, focused on Hotels, keeps declining by double digits and is the main reason for the stock’s total collapse. But TripAdvisor has long pivoted to Experiences, a growing and lucrative category, which now accounts for more than 60% of the revenue mix. In other words, this is a stable business disguised as a rapidly melting ice cube. One can argue that the faster Hotels disappear from the scene, the sooner the market will be able to focus on the growing Experiences business and revalue the stock.
From an Elliott Wave perspective, too, the market seems to be setting the stage for a bullish reversal.
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The weekly chart above reveals TripAdvisor’s long and painful 90% collapse since 2014. It can be labeled as a W-X-Y double zigzag correction. The impulsive structure of waves (c) of W and (a) of Y are clearly visible, while wave (c) of Y is an ending diagonal. If this count is correct, we can expect one last new low in wave 5 of (c) of Y near $8 per share, before the entire retracement is over and the bulls return.
In conclusion, it’s been a long and dark tunnel for TripAdvisor investors, but there’s still light at the end of it. Experiences is a discretionary industry, which suffers during macro uncertainty and recessions, but the company seems well-positioned to thrive in it long-term. Provided good execution from management and given this Elliott Wave setup, we think the stock could be worth multiples of its current price in a few years’ time.
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