Starboard Value's big stake in Tripadvisor is also helping these stocks

Activist investor Starboard Value has disclosed a 9% ownership stake in Tripadvisor, acquiring nearly 10.64 million shares valued at approximately $159.4 million, making it the company's third-largest shareholder. This news propelled Tripadvisor's stock up 16.7% and boosted other online travel service providers like Expedia. Starboard's move highlights Tripadvisor's significant undervaluation, as it trades at a 1.1x price-to-sales ratio, notably below peers like Expedia (1.5x) and Airbnb (6.8x), and Starboard's average acquisition price of $13.36 was well below previous buyout bids, signaling potential for activist-driven value creation.

Analysis

The disclosure of a 9% stake in Tripadvisor Inc. (TRIP) by activist investor Starboard Value has served as a significant catalyst, driving the stock up 16.7% and lifting the broader online travel sector, including a 4.1% gain for Expedia Group Inc. (EXPE). Starboard's investment, accumulated at an average price of $13.36 per share, positions it as the third-largest shareholder and underscores a clear value thesis. Tripadvisor's valuation is a key focal point, trading at a substantial discount to its peers with a price-to-sales ratio of 1.1x, compared to Expedia's 1.5x, Airbnb's 6.8x, and Booking Holdings' 7.0x. While this low multiple is partially justified by its projected two-year revenue CAGR of 7.3%, which is below that of Airbnb and Booking, it is slightly higher than Expedia's 6.8%. The activist's entry price is notably below the $18 to $30 per share bid range Tripadvisor received in a previous transaction, suggesting Starboard sees a significant opportunity to unlock value, potentially through strategic actions or an eventual sale. Despite the positive market reaction to the activist stake, Wall Street analysts remain cautious, with 50% holding a 'neutral' rating and a consensus price target that implies only a modest 12% upside from the pre-surge price.

Key Decisions for Investors

• Investors should view Starboard's activist stake as a primary catalyst for Tripadvisor, potentially forcing operational improvements or a strategic transaction to close the significant valuation gap relative to its peers.
• While Tripadvisor's 1.1x price-to-sales ratio is attractive, its 7.3% projected revenue growth is modest; monitor for any activist-led initiatives that could accelerate top-line growth or improve profitability to justify a multiple re-rating.
• Consider the relative value within the sector, as Expedia also benefited from the news and possesses a higher percentage of 'buy' ratings from analysts compared to Tripadvisor, despite having a slightly lower growth forecast.