TripAdvisor Is Overpriced Nonsense

 | Jul 24, 2014 | 11:00 AM EDT  | Comments
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No matter how many times people explain it to me, I've never been able to understand TripAdvisor (TRIP). So there are travel-aggregator websites, such as Expedia (EXPE), that let you compare flights and hotels and charge a fee for the privilege. There has been a big bull market in these guys. Just look at the performance of Priceline (PCLN). In fact, when you look at the size of the travel-website industry vs. the market capitalization of the airlines themselves, you start to think that things might be out of whack.

But then you have TripAdvisor, which adds another layer -- you get to compare prices of trips among travel aggregators. Like, who is going to get me the best price: Priceline, Expedia or Orbitz (OWW)? I've played with it some, and every time I do this exercise, the prices are never apart by more than a few dollars.

For me, this has always seemed to be the pinnacle of uselessness. What value is being added here? This is when the TripAdvisor bulls get indignant and tell me that the value is in the reviews. Again: Huh? There are all kinds of places on the Internet where I can read a review. Moreover, who needs to read a review of the Hampton Inn? A Hampton Inn is a Hampton Inn.

But then the TripAdvisor bulls tell me, You just don't get it. It's international reviews for which everyone uses it. So this thing has a $15 billion market cap and the only thing people use it for is international reviews? Give me a break, guys.

Well, TripAdvisor makes money, but not very much -- just under $70 million last quarter. However, I just told you the market cap, and I just told you the quarterly earnings, and if after reading that you don't believe the stock is a wee bit expensive, you might be a perma-bull hack. There has been speculation that Facebook (FB) might buy TripAdvisor, and CEO Mark Zuckerberg is the king of overpaying for stuff. But, honestly, I think WhatsApp is a lot more valuable to Facebook than TripAdvisor would be.

Speaking of Facebook, that company reported Wednesday, too, and it was another great number. The company is now getting 62% of its advertising revenue from mobile. If you'll remember, that was the bear case on the stock, back when Facebook stock was at about $20: People said the company was doomed because people were using Facebook on their phones, and there was no way to put ads on phones. So the trade was that the company who hires the smartest people in the world wasn't going to be able to figure out how to put ads on a mobile phone.

I think Facebook, a couple of years past its initial public offering, is now like what Google (GOOGL) had been two years past its debut. People back then thought Google was just a search engine, but it has turned out to be much more than that. People think Facebook is just a social network, a place where people hang out online, but my guess is that it will turn out to be much more than that. Besides, everyone -- and I mean everyone -- who has bet against Zuckerberg has lost. Yet people still try.

I think the tech sector is due for another correction, such as what we saw a few months ago, and you have to distinguish between real businesses such as Facebook and overpriced nonsense such as TripAdvisor. The former will likely outperform the latter.

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