What happened

Shares of TripAdvisor Inc. (NASDAQ:TRIP) were getting grounded as Guggenheim Partners cut its estimates on the travel recommendation website, citing increasing competition from Priceline Group (NASDAQ:BKNG).

TripAdvisor stock was down 8.5% on the news as of 11:12 a.m. EDT. Normally, a bearish remark wouldn't hit a stock so hard, but it has plunged over the last three years as the company has missed estimates and struggled to build out its own travel booking business.

A woman in an airport watches a plane take off.

Image source: Getty Images.

So what 

Guggenheim analyst Jake Fuller maintained a neutral rating on TripAdvisor, but said an advertising push from Priceline appears to be taking market share from Trivago (NASDAQ:TRVG) and he believes it could have the same effect on TripAdvisor. 

Fuller lowered his second-half revenue growth estimates at TripAdvisor from 7% to 5%, and he sees cost-per-click revenue falling 1.6% instead of increasing 1.5%. 

Now what 

Fuller added that Guggenheim's valuation makes it vulnerable as the stock trades at a pricey P/E ratio of 61 even with the stock's recent collapse. Its strategy to transition from recommendations to bookings has not yet paid off, and the rise of mobile has also eaten into margins. Hotel revenue, the bulk of its business, increased just 3% in its most recent quarter, and earnings per share through the first half of the year has compressed from $0.44 to $0.28. With increased competition from Priceline, it looks like TripAdvisor's problems are far from over.

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