Despite the activist enthusiasm, Tripadvisor’s fundamentals paint a more serious picture.
Tripadvisor stock (NASDAQ: TRIP) surged 8% on July 2 — significantly surpassing the S&P 500’s modest 0.47% increase — after activist investor Starboard Value revealed a stake exceeding 9% in the online travel company. The approximately $160 million investment caused shares to climb another 7% in after-hours trading on Wednesday.
The timing of Starboard’s action is significant. Tripadvisor has faced challenges lately, with shares declining roughly 15% over the past year, and the company has been considering strategic options since early 2024. This process commenced shortly after Tripadvisor entered into a $435 million agreement to acquire its majority stakeholder, Liberty TripAdvisor, last December. In January, the firm also revealed that it received a non-binding proposal from a strategic bidder.
Despite the activist enthusiasm, Tripadvisor’s fundamentals paint a more serious picture. Nevertheless, those looking for growth with less volatility than individual stocks may want to look into the High Quality portfolio, which has outperformed the S&P 500 with returns exceeding 91% since its inception. Separately, refer to Seagate Stock to $85?Valuation: Not a Bargain
At first sight, Tripadvisor may seem attractively priced, exhibiting a price-to-sales (P/S) ratio of 1.0 compared to the S&P 500’s 3.1. However, a more detailed examination uncovers a significantly less appealing valuation. The company trades at a price-to-free cash flow (P/FCF) ratio of 61.3, nearly three times the S&P 500’s 20.9, and a price-to-earnings (P/E) ratio of 41.1, well above the benchmark’s 26.
