Momentum stocks have been hit especially hard over the past month. Most stocks related to the Internet has taken it on the chin. 

With the lofty valuations for some of these tech stocks, it’s understandable that investors are booking gains and taking refuge in “safety” stocks. However, there are some stocks that are being pulled down unnecessarily. 

Shares of TripAdvisor (Nasdaq: TRIP) are down over 15% over the past month, more than Amazon.com (Nasdaq: AMZN) over the same period. But TripAdvisor makes as much money on a net income basis as Amazon, and with a market cap that’s only a tenth of Amazon’s.

#-ad_banner-#With a rebounding economy, more people are looking to book vacations. TripAdvisor isn’t known for its booking capabilities, but it is known as the top place for research. Meanwhile, the likes of Priceline (Nasdaq: PCLN), Expedia (Nasdaq: EXPE) and Orbitz (NYSE: OWW) duke it out for customers looking to book trips. TripAdvisor is in a league of its own and has one of the largest online communities of travelers in the world. 

Over 150 million reviews and opinions are posted on TripAdvisor.com, covering more than 3.7 million accommodations, restaurants and attractions. TripAdvisor already has a global reach and operates in 38 countries worldwide, including through its Daodao.com site in China.

With over 2 billion users, TripAdvisor has a large user base that it has yet to fully monetize: Over 70% of its users are not monetized. TripAdvisor generates most of its revenue from click-based ads, but its other businesses, which include transactions and subscriptions, have the potential to grow rapidly.

In its most recent quarter, click-based ads accounted for 68% of the company’s revenue, which display ads accounting for 15%. For the year, website traffic was up 55% from 2012, with TripAdvisor.com attracting over 260 million unique visitors. In March alone, TripAdvisor attracted nearly 22 million unique visitors, compared with nearly 47 million for Twitter (NYSE: TWTR). 

	Flickr/phalinn
	TripAdvisor’s fastest-growing market is Asia, where revenue grew 40% during the quarter. (Pictured: Rawa Island, Malaysia)

In terms of mobile, total app downloads for iPhone and Android crossed the critical 100 million mark this month, a milestone for any company. Downloads have more than doubled in the past year and are six times higher than in 2011. According to app analytics firm Distimo, TripAdvisor is now the most popular travel app, based on total App Store downloads.

Where the company is seeing the fastest growth is overseas. In the fourth quarter, sales grew 30% in Europe, the Middle East and Africa — but the fastest-growing market for TripAdvisor is in Asia, where revenue grew 40% during the quarter. This comes as a rapidly emerging middle class in China and other Asia Pacific countries are developing a love for travel.

TripAdvisor has also been building its Hotel Price Comparison tool, a metasearch product that searches several other search engines at once and generates a single list of results. It allows travelers to compare booking options easily with up-to-the-minute hotel prices and availability. Currently, Priceline-owned Kayak owns half of the travel metasearch market in the U.S., but TripAdvisor’s tool has been making steady gains. This feature is also now available on its mobile apps and provides booking on the go, potentially opening up a new revenue stream. 

Looking ahead, TripAdvisor expects click-based ads to grow in the mid-20% range. Display ads are expected to increase at a high-teens rate. Altogether, total revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to each grow between 20% and 30% this year.

The largest shareholder in TripAdvisor is John Malone’s Liberty Interactive (Nasdaq: LINTA). Liberty CEO Gregory Maffei is on the board of directors, as is IAC/InterActiveCorp’s (Nasdaq: IACI) Barry Diller. On the hedge fund side, Philippe Laffont’s Coatue Management has a 3.2% stake in the company.

With a price-to-earnings (P/E) ratio above 50, TripAdvisor appears to be trading well above some of its peers — but its forward P/E (which is based on next year’s estimated earnings) is under 30. The industry average trailing P/E is actually around 40, which is right around where Priceline and Expedia currently trade — and analysts expect TripAdvisor’s earnings to grow at a faster rate than either Priceline’s or Expedia’s over the next five years.

Risks to Consider: The travel space is intensely competitive. The online travel market is also moving more toward mobile, which is more difficult to monetize for a site like TripAdvisor that relies primarily on click-based and display ads for its revenue. Furthermore, any weakness in global economic growth would have an adverse impact on the global travel market.

Action to Take –> Buy TripAdvisor for upside to $110. That assumes an industry-average P/E on 2015 earnings of $2.75 a share, suggesting over 35% upside.

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