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Will TripAdvisor Be the S&P 500's Top Stock in 2017?

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Shares of TripAdvisor (NASDAQ: TRIP) are in a state of ascent early in 2017. The stock has risen 11.8% this young year. That may not seem like much, but TripAdvisor is one of just 21 stocks in the S&P 500 brandishing double-digit percentage gains year to date. 

Investors can use the upticks. TripAdvisor stock plunged 46% last year, making it the third biggest loser among S&P 500 components in 2016. Decelerating revenue and earnings growth has scared away investors demanding more out of their richly valued growth stocks, and TripAdvisor finds itself trying to get its groove back in 2017 despite the stock's encouraging bounce so far this month.

TripAdvisor isn't at its best right now. Revenue climbed just 1% -- and an equally unimpressive 3% on a constant currency basis -- in its latest quarter. As bad as that may seem, it's actually a break from the slight top-line declines it had posted in back-to-back quarters before that. 

The site's popularity may be as strong as ever. Average monthly unique visitors hit 390 million in its latest quarter, 11% higher than its reach a year earlier. However, TripAdvisor did suffer a 10% slide in its click-based advertising and instant booking revenue despite the bump in its reach, a problem since that's nearly half of its business.

There's a lot to prove next month

TripAdvisor's best shot at justifying this month's gains will come on Feb. 16, when it reports financial results for the fourth quarter. Analysts aren't holding out for much. They see a sharp decline in earnings, but at least revenue growth is expected to accelerate to a 6% clip. 

Analysts see the top-line growth accelerating into next year, with revenue growing 11% in 2017. Wall Street pros see a more modest gain in earnings. The expected margin contraction is a result of investments in growth initiatives weighing on TripAdvisor's bottom line. 

There's clearly upside here if TripAdvisor is able to boost the monetization of its hotel- and vacation-researching visitors, something that was initially the hope with the integration of its Instant Book transaction platform into its hotbed of venue reviews.

Wall Street isn't convinced. It's been paring back profit targets in recent months. The same analysts who were holding out for a 2017 profit of $2.04 a share are now perched at $1.57 a share, a move that prices the stock at a hearty 33 times forward earnings.   

Miller Tabak analyst Manish Hemrajani initiated coverage of TripAdvisor stock with a "hold" rating last week, concerned about the near- and medium-term challenges of making the integration of its booking engine pay off. The ho-hum reaction isn't fatal, of course. Momentum can turn. A strong report next month can silence the skeptics and possibly woo believers again.

TripAdvisor stock has taken a step in the right direction this year, but it will need to do a lot more to win back all the ground it lost last year. 

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends TripAdvisor. The Motley Fool has a disclosure policy.