בס״ד

TRIP and Fall, and Keep on Falling (TRIP)

Posted on May 26, 2022

TripAdvisor (NASDAQ:TRIP) is an online travel company that operates reservation-booking websites globally.

You can book your flights, your train seats, your hotels and your dining venues in 20 different languages from Nashville to Nanking, because – hey, what the hell else you gonna do with that blasted phone.

The company offered up earnings on May 5th amid a harrumph of enthusiasm from Wall Street that we couldn’t take seriously.

Why?

The narrative.

The Narrative?

That’s right, the narrative.

And what’s the ‘narrative’, you ask?

Well, the narrative is what’s left when you strip out all the truth.

So, what’s TripAdvisor’s narrative?

Well, TRIP is reporting –

That Batflu restrictions are easing, that everyone is dutifully taking their graphene oxide injections, and therefore travel and dining are now ramping up again.  As a result, earnings should be roaring next time we meet, sometime, say, in early August.

Only – it ain’t necessarily so.

He didn’t take no guff.

There ain’t gonna be no return to travel or dining normalcy, friends.

Why?

Because no one’s got any money.

And businesses are closing.

And the prices are too damn high (and getting higher).

Moreover, TRIP’s fundamentals are dim-witted and limping.

To wit –

  • P/E is non-existent (that’s what happens when you still haven’t turned a buck),
  • Dividend Yield is non-existent (’cause there ain’t no cash to disburse),
  • Price to Book is 4.01 (oops!),
  • Debt/Equity is 1.18, and
  • Both Sales and Earnings are negative for the last five years: -27.10% and -9.40, respectively.

So what’s to cheer about?

Not much, we say.

The company reported a Y/Y doubling of revenues in their May 4th earnings show, but the stock failed to move higher.

As one Wall Street stock jock breathlessly claimed –

Oh?

And that’s a worthy accomplishment?

Are there no men out there…?

Simply put, no one believes the narrative, including the company’s spokespeople, who offered NO GUIDANCE on the stock at the time.

Apparently management’s unsure of which plotline to follow.

No guidance is a horror show, friends.

And it proves that this one is in trouble.

New Leadership = Failed Leadership

TripAdvisor replaced their CEO just a few weeks back, so no one’s quite sure what will go wrong next.

What is clear is the company’s sales and marketing budget grew by 93% in the last year to $141 million, because Google and Facebook are the way things get done nowadays.  Look for more of the same waste with new leadership as 2022 plods on.

A shame, we say, since almost no one’s going to book a weekend in Vegas given the current macro picture.

Now look at the chart –

Technically, the picture’s as follows –

  1. RSI and MACD (in green) are both below their respective mid-way waterlines, indicating momentum is with the bears.
  2. Price may play slightly higher from time to time, but only within the confines of a descending triangle (in blue), a bearish pattern that indicates bulls are using greater and greater stores of ammunition and energy to accomplish less and less.  It’s just a matter of time before the bottom falls out.
  3. We’ve highlighted (in black) just two examples of bullish volume that ultimately went for naught.
  4. All the salient moving averages are unfurled, and three are headed lower, essentially putting a lid on the stock in the $26 range, for now.
  5. Should price retest support at $20.75 (in purple), we reckon she won’t hold.  And there’s no knowing how far she’ll fall. 

And that’s precisely why we’re setting the trade there.

A Jew and His Gold recommends you consider setting the TRIP September 16th 26 synthetic short* for a debit of $2.68 (1.97/4.65).  Set a STOP buy order on the shares at $26 to avoid any runaway loss.

[*Sell the 26 CALL and buy the 26 PUT.]

Rationale: our breakeven on the trade sits at $23.32, just thirteen cents below the current price, or one half of one percent (0.5%).  And that’s majestic.

It also means our short is already $2.55 in-the-money and is theoretically capable of earning $23.32 (best case scenario).

Our loss is capped at our initial debit ($2.68) if proper STOPs are in place.

Remember, too: should the STOP be triggered, a new STOP sell at the same $26 must be set to keep the trade square.  Should that STOP be tripped, a new STOP buy order should again be placed at $26.  And so on, until the trade is closed.

G-d bless us all.

In the face of the evil ones, may we prevail and ever find favor in His eyes.

Many happy returns!

Matt McAbby

 

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