A TripAdvisor Vote of Confidence and a Caution About Priceline

Investors drove TripAdvisor’s stock price up nearly 8 percent to $76.68 per share yesterday as a vote of confidence about the company’s future came in from a key figure — the company’s CEO.

No, this wasn’t the usual CEO spin about a company’s buoyant prospects. Instead, TripAdvisor CEO Stephen Kaufer put some personal money behind his strategy — Kaufer purchased 13,785 shares of TripAdvisor’s common stock on November 26 at $72.55 per share.

There’s nothing like a CEO investing in his own company to show that there is confidence and commitment, and that is welcome news for Kaufer’s fellow shareholders.

While TripAdvisor’s share price headed up, the Priceline Group’s share price dipped a bit on the same day, December 2, falling 1.2 percent to $1,139.36 per share.

Law of Large Numbers

Priceline’s hiccup coincided with FBR Capital Markets & Co. downgrading the stock from outperform to market perform based on Priceline’s recent guidance that “highlights the challenges of maintaining growth at scale,” FBR states.

Part of the downgrade has to do with FBR’s view that the Priceline Group’s large hotel business is maturing and the growing mix of vacation rentals on its websites and in its apps is slowing per-property productivity.

“We expect bookings growth to slow from +32% in the 2012-2014 period to 16%-17% in the 2014-2016 period,” according to the research note from Jake Fuller, FBR’s senior vice president, research. “While still 1.5x the pace of the channel, it is simply hard to see PCLN sustaining growth at 3x the pace with Expedia’s (EXPE-Outperform) ramping and new challenges emerging.”

With huge swaths of the world yet to be conquered by the Priceline Group’s Booking.com and its percentage grip on the entire global hotel market still in the low single digits, FBR concedes that it could be wrong about the pace of Priceline’s potential growth.

“It is feasible that we are underestimating the impact of macro factors and overestimating the pace of maturation on bookings,” FBR states. “PCLN has a massive cash balance and significant free cash flow, which could be used to augment growth.”

FBR is hedging its bets, so to speak.