Tripadvisor (NASDAQ: TRIP) Is Up 40% In A Month But Still A Buy

A 5.7% jump on Tuesday’s session was enough to make shares of Tripadvisor (NASDAQ: TRIP) among the best performers in the S&P 500. It means their shares hit post-COVID highs on the same day when the index closed at a fresh all-time high too and it’s likely that they’ll finish 2020 on a strong note.

It wasn’t always going to be like this though. As a travel and hospitality review site, Tripadvisor was destined to be on the front line of the COVID pandemic as it rolled into town in late February. Non-essential businesses like restaurants and hotels shut their doors and flight numbers cratered more than 90%. With their raison d'être suddenly removed for an indefinite amount of time, it’s not surprising that their shares fell more than 50% in a couple of weeks.

It’s worth pointing out that coming into 2020, Tripadvisor was already under pressure and close to all time lows. Since peaking in 2014, shares have been stuck in a fairly vicious downtrend. But 2020 has truly been a remarkable year for the stock market and not only have shares of Tripadvisor more than doubled since March, they’re also up 40% in the last month alone. As we head into the last four weeks of the year, there’s a strong case to be made that there’s a ton of upside potential to be filled yet.

Stars Start To Align

Like with many other equities out there right now, you can’t judge recent or near-term performance in the context of longer term performance. This year’s performance has been driven almost completely by the coronavirus pandemic, a black swan, and all the ebbs and flows that that has brought us. As numbers have spiked and economies have shut down throughout the year, equities have sold off. As numbers have dropped and promising news about vaccines hit the headlines, equities have rallied. It’s this latter catalyst which will be the defining factor of how Tripadvisor shares do in the next few months.

It’s looking likelier every day that there will be a publicly available vaccine ready in early 2021. What that means in a nutshell is that we’re closer than we’ve ever been to seeing a return of the old normal. For the likes of Tripadvisor, that means people eating out every night of the week and taking vacations like they used to. In fact, there’s a growing sentiment on Wall Street that we’re in for a couple of blow-off months in those industries as consumers around the world catch up on all the missed events and trips of the past year. That means a much-needed spike in Tripadvisor’s site traffic which leads to a jump in their core advertising revenue.

Catch-up Play Is A Go

Already we’re starting to see growing consumer optimism filter through in their numbers. At the start of last month the company released their Q3 earnings report which came in well ahead of analyst expectations. While revenue was still down 65% on the year, it was a far cry from the 86% drop reported back in August’s Q2 numbers. Based on the stock’s recent performance, investors are already starting to position themselves for another marked improvement in Q4’s report.

With many of the airline and hotel stocks also starting to find their feet and hit post-COVID highs, it’s only natural that Tripadvisor would start to hit its stride too. While tech was able to make hay when the sun shined this past summer, momentum is starting to swing towards those names that have struggled all year. Investors getting involved are buying into both the recovery potential and the catch-up play, each of which have the potential to fuel a hot rally once they build up a head of steam.

Reporting much better earnings than expected and hitting post-COVID highs sounds like they’re doing just that.