While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Tripadvisor Inc (NASDAQ:TRIP) slipped 1% in premarket trading Monday after Nomura Securities downgraded the online travel company from buy to neutral.
So what: Along with the downgrade, analyst Anthony DiClemente reiterated his price target of $103, representing about 2% worth of downside to Friday's close. So while momentum traders might be attracted to Tripadvisor's price strength in recent months, DiClemente's call could reflect a sense on Wall Street that its valuation is becoming a bit stretched.
Now what: According to Nomura, Tripadvisor's risk/reward trade-off isn't too attractive at this point. "We continue to stand behind the company's fundamentals of 1) metasearch driving faster growth in user monetization, 2) continued global user growth, and 3) instant booking path to drive higher CPCs," said DiClemente. "However, we believe valuation is full at current levels, and as such, we downgrade the stock to Neutral and await a better entry point." With Tripadvisor shares up more than 30% over the past three months and trading at a forward P/E of 35, it's tough to disagree with Nomura's cautiousness.
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Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends TripAdvisor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.