TripAdvisor (TRIP) and Expedia (EXPE) Cut to 'Sell' at Stifel on Concerns About Weakening Travel Sector

(Updated - February 22, 2016 9:01 AM EST)

Stifel downgraded TripAdvisor (NASDAQ: TRIP) and Expedia (NASDAQ: EXPE) from Hold to Sell with price targets of $53 and $95, respectively. The Priceline Group (NASDAQ: PCLN) was maintained at Hold.

Analyst Scott W. Devitt expressed concerned about the macro environment, increasing efforts by hotels to drive direct bookings, and hotel consolidation.

"Following better than feared results and 2016 guidance, shares of online travel companies have experienced a relief rally and many of the concerns have been somewhat shelved (at least temporarily)," said Devitt.

"Overall we see a weakening backdrop for the online travel sector, disproportionally impacting Expedia and TripAdvisor, stemming from (1) the moderating macroeconomic outlook in the U.S. and globally, (2) maturing U.S. online bookings penetration, (3) increasing efforts by hotels to drive direct bookings, and (4) consolidation of the U.S. hotel market," continued the analyst. "We are downgrading shares of EXPE and TRIP from Hold to Sell as we believe the weakening U.S. travel and global macroeconomic backdrops will disproportionately impact their intermediate/long-term growth potential."

Devitt added, "Since our concerns are primarily focused on the moderating U.S. macro environment, increasing hotel competitive activity, and higher chain market share, we view EXPE (65% U.S. booking exposure in 2016E) and TRIP (56% U.S. revenue exposure in 2016E) as highly exposed to a potential downturn. We view the macro risk as particularly concerning when coupled with the execution risk related to the transformational business transitions that both companies are undertaking, which PCLN has avoided by sticking to an organic growth strategy."

For an analyst ratings summary and ratings history on TripAdvisor click here. For more ratings news on TripAdvisor click here.

Shares of TripAdvisor closed at $63.42 yesterday.

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