Should you buy or sell TripAdvisor shares amid subscription plan changes?

on Sep 20, 2021
Updated: Sep 21, 2021
  • TripAdvisor shares on Monday plunged nearly 9% amid news about subscription plans changes.
  • In an abrupt announcement, the company said it is changing a new discount feature.
  • The company reportedly felt resistance to the upfront discount plan from larger hotel chains.

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On Monday, TripAdvisor Inc. (NASDAQ:TRIP) shares plummeted nearly 9% after announcing plans to scrub a new discount feature from subscription plans. The company had introduced an upfront discount plan. However, it felt resistance from large hotel chains that felt such plans would disrupt the normal practice of offering similar room rates across different reservations.

TripAdvisor had introduced a $99-a-year subscription service that gave its customers discounts by booking hotels at a lower rate than published rates. The company now plans to give its customers rebates instead of the upfront discount.

The online travel reservation and information provider shares are still up 15% despite also suffering from the global stock market meltdown triggered by China Evergrande Group’s (HKG:03333) collapse.

Should you bet on TripAdvisor’s exciting growth prospect?

From a valuation perspective, TripAdvisor shares trade at a forward P/E ratio of 28.56, making the stock less attractive to value investors. Moreover, analysts expect TRIP earnings per share to fall by 320% this year.

However, looking forward, analysts also estimate the company’s EPS to skyrocket by a whopping 2,183% next year as the world continues to recover from the global pandemic. As a result, growth investors could find TRIP shares compelling for long-term investing.

Therefore, the latest TRIP stock price decline could be an opportunity to buy ahead of its exciting growth next year.

Source – TradingView

TRIP shares trade a crucial support level

Technically, TripAdvisor shares appear to have created a downward price gap following Monday’s plunge. Moreover, the stock price seems to have moved closer to the oversold conditions of the 14-day RSI.

At the current price of about $32.55, TRIP shares are trading at a key support level. The stock has not fallen below since February. As a result, investors can target short-term rebounds.

They could target profits at around $34.60 or higher at $36.63. On the other hand, $30.91 and $28.98, provide crucial support levels.

Bottom line: could it be time to buy TRIP shares?

In summary, although TRIP shares plunged after announcing plans to scrub the upfront discount plan, the company plans to replace it with rebates. Therefore, investors may have overreacted to the potential impact of changing its subscription plans.

Moreover, with analysts expecting earnings to spike by more than 2,100% next year, the 9% pullback could be the perfect opportunity to buy the stock.


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