Could Priceline Group Inc (NASDAQ:PCLN) still buy out TripAdvisor Inc (NASDAQ:TRIP). That’s the supposed cause for the 3% bump in TripAdvisor stock as Thursday progressed, but there’s not much backing it other than social chatter prompting a salvo of #FakeNews hashtags.
A Priceline-TripAdvisor marriage has been a longtime speculation — not just by Internet trolls, mind you. Consider this from a 2015 Bloomberg piece, “Malone’s TripAdvisor May Be Priceline’s for the Taking”:
“John Malone is in the business of maximizing the value of his holdings,” said Joseph Stauff, a New York-based analyst on the event-driven/special situations team at Susquehanna Financial Group LLP. “He’s got a stake in a publicly traded company and he’s trying to get a premium valuation on that. How does he do it? He punts out his holding in TripAdvisor knowing damn well that more than just TripAdvisor wants to bid for it.”
Other analysts have jumped in the fray too, such as Bank of America’s Nat Schindler, who said last year that speculation over a possible deal between TRIP and PCLN had increased … but ultimately said the deal was “unlikely.”
Though you can’t blame TripAdvisor stock longs for hoping.
The host of various internet travel businesses — including vacation rentals, hotel price comparisons and booking for several travel necessities — has managed to grow, with revenues climbing from $945 million three years ago to $1.5 billion in 2016. But earnings have been increasingly problematic as TRIP has boosted SG&A to better compete against the likes of Priceline and Expedia Inc (NASDAQ:EXPE).
In its Q4 earnings report, CEO Steve Kaufer said:
“We rolled out hotel instant booking globally and strengthened our position in Attractions, Restaurants and Vacation Rentals. With our price comparison and booking capabilities in place, we are focused on raising consumer awareness of TripAdvisor as a great place to go to price shop and book.”
But the ambitious moves have been costly, and impatient investors have bailed TripAdvisor rather than wait around for results. Thus, TRIP shares are off more than 60% since their 2014 peak, including a 31% decline in the past year, and an 8% drop for the year-to-date amid a broadly higher market.
While TripAdvisor is getting cheaper by the day — TRIP is worth about $6.1 billion by market capitalization — an acquisition still would be a stretch for both Priceline and Expedia, which boast roughly $4 billion and $2 billion in cash and short-term investments each. Both also have debts that outstrip that cash.
For those looking for a short-term move, today’s gains in TripAdvisor stock have brought shares back up against the shorter 20-day moving average for yet another test in the month of March.
But given the impetus — rumors that have never come to pass — there’s little reason to think TripAdvisor stock has much more upside, even as a swing trade higher.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.