TripAdvisor Stock Up 11% Following New Debt, Partnership With Lysol Parent
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Some of the biggest gains in trading recently came from an unexpected source: TripAdvisor (NASDAQ:TRIP). Looking to TripAdvisor for gains, especially under current market circumstances, may seem like a bad idea waiting to happen, but a recent 11.1% run-up in the price suggests that that's exactly what's happening from some corners of the market.
An Unlikely Partnership That Makes Surprising Sense
So what fueled that huge spike for TripAdvisor? This is an especially good question given that the travel market is still pretty heavily depressed; making a long-distance trip almost anywhere seems like a bad idea. Between the locked-down states barely allowing anyone to sit down in a restaurant and the wide-open states giving some people the willies over potentially catching coronavirus, travel isn't on a lot of minds right now.
Enter the Reckitt Benckiser Group (OTCMKTS:RBGLY), which just recently formed a partnership with TripAdvisor to help restore consumer confidence in travel once more. If the Reckitt Benckiser Group isn't a familiar name, perhaps some of its product lines will be, which include Dr. Scholl's...and Lysol.
The new partnership is focused on bringing confidence back for the roughly eight million travel businesses that are part of the TripAdvisor umbrella, giving consumers the necessary peace of mind they need to travel like they did in 2019. Cleanliness is now a major concern for travel consumers; reports note that 64% of consumers in a study about travel now rank cleanliness as the biggest concern.
The ultimate goal is that, between TripAdvisor's experience and reputation in travel circles and Lysol's experience and reputation in killing germs, the duo will be able to reinforce that travel can be safe once more, with the right precautions taken. To back this up, the duo will be putting together some educational collateral detailing best practices for cleanliness in various environments, as well as the release of Lysol Disinfection and Sanitization Kits, available for purchase online.
A Well-Funded War Chest Doesn't Hurt, Either
That's a big step in and of itself, but it actually gets better; TripAdvisor's parent company, Liberty TripAdvisor Holdings (NASDAQ:LTRPA) earlier this morning closed a private offering of exchangeable senior debentures with a due date of 2051. The offering was valued at $300 million, and reports suggest that the initial purchasers now also have an option to come back for more, up to $30 million worth.
TripAdvisor's plans for that fresh round of funding include plans to access capped call transactions, as well as a slate of “general corporate purposes,” including redeeming some notes coming due in 2025.
A Bullish Spike in Analyst Sentiment Contributes
While TripAdvisor's combination of cash-raising and confidence-building looks like a decent idea to get people back in their cars and on planes, especially with summer travel season now just a couple months away, there's a further tailwind contributing to recent gains: improving analyst sentiment.
In fact, TripAdvisor's analyst sentiment—based on our latest research—has only been improving for the last six months. By way of general comparison, six months ago, the company had three “sell” ratings on it, as well as 16 “hold” and four “buy”, for a consensus of “hold.” Fast forward to today and the company remains at a “hold”, but the hold is now made up of 10 “hold” ratings and six “buy” ratings. There is no longer any “sell” presence on TripAdvisor.
The price target has likewise improved; six months ago it stood at $25.55, but today, it's at $37.94, representing downside potential for the first time in the last six months. Since TripAdvisor shares currently sell at $54.11 as of this writing, it's actually quite a bit of downside potential. However, both Citigroup and Truist Securities raised their price targets on TripAdvisor recently, both going to $62 per share, which means the latest updates suggest gains potentially afoot even above the current share price.
A Golden Ticket to a Winning Package
So to sum up, we not only have a new corporate partnership geared around dispelling some of the biggest fears of travel right now, but we also have a freshly-funded war chest and a big new slug of positive coverage from market analysts. Take these three factors together and it's not hard to see why TripAdvisor recently posted double-digit gains.
Will these gains hold? Well, a lot of that's likely to depend on the numbers being generated in the next few months. If the travel season picks up—and given the rapidly-climbing take-up rates in Covid-19 vaccinations as well as the growing numbers of therapeutic treatments that's no longer the pipe dream it once was—then TripAdvisor should do a pretty brisk business. Pent-up demand for travel is likely staggering right now because most have barely left the house in the last year. By addressing some of the biggest issues keeping travelers home-bound right now, the end result should prove positive and open up TripAdvisor to more gains down the line.
TripAdvisor is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.