Stifel recently talked about the decline in the travelling sector and how it may affect TripAdvisor (TRIP) and Expedia (EXPE). Both companies have seen a decline because of the overall situation of the travel industry and Stifel was on the case about the current scenario.
The firm’s analyst, Scott W. Devitt said that there are growing concerns for the overall macro environment; saying more and more hotels are now looking towards methods to increase bookings made directly and are also working on the consolidations of hotel bookings. He said that the results posted by travel companies have been better than what everyone had feared and after the guidance that was an improvement, the shares of these companies have seen a period of relief and all of the concerns around them have died down for now.
The analyst said that despite the situation, there are many signs of weakness in the online travel industry and these have affected TripAdvisor and Expedia because of a few other reasons as well. These reasons include the overall macroeconomic environment in the US along with the consolidation of the hotel market and the fact that hotels are working to drive customers towards direct online bookings. He added that their concerns are there because of the current situation of the US market and the fact that it has been moderating and has reached maturity. He said that because of this, TripAdvisor and Expedia are more exposed to a decline and have more potential for a downturn. He said that even if you do not consider these factors, the execution risks that are there because of the “transformational business” transitions that these companies are undertaking, bring all the more risk their way making these companies more vulnerable than ever.
The analyst also said that the current backdrop of the US travel market is going to affect these companies disproportionately and is also going to hurt their medium to long term growth potential. Following the comments, the analyst changed his rating for both companies from a Hold to a Sell and provided a price target of $53 for TripAdvisor and $95 for Expedia.