Shares of TripAdvisor (NASDAQ:TRIP) gained 5% on Friday after the online travel company was upgraded by an analyst who argued the negativity surrounding the stock is overdone.
TripAdvisor earnings fell short of expectations in the fourth quarter, and the company at that time warned investors to expect the weakness that it was seeing in hotel bookings to last well into 2019. Investors heeded the warning, with the company's shares coming into Friday trading down more than 10% from that announcement.
But in a note Friday morning, Deutsche Bank analyst Lloyd Walmsley said the sell-off has gone too far, upgrading the shares from hold to buy and setting a price target of $65 per share, more than 20% higher than Thursday's close.
Walmsley said that he still expects hotel shopper growth and active users to fall when TripAdvisor releases first-quarter earnings on May 8, but he believes the company's restaurant and attractions business has room to grow and help push overall top-line growth.
More broadly, he believes the company could use the earnings call to lay out a multiyear outlook that underscores management's confidence TripAdvisor can produce long-term growth, something that should help reassure investors.
Even if the company's long-term prospects are healthy, it appears investors are still in for a rough ride in the near term. TripAdvisor could be a good buy today for an investor with a long-term outlook, but don't let one day's price movement fool you into thinking there isn't the chance of turbulence up ahead.