New Partnership Could Help Priceline Just As Much As It Helps TripAdvisor: Here's Why

Shares of TripAdvisor surged higher by more than 25 percent after it announced a partnership with Priceline Group. As part of the agreement, some of Priceline's brands will participate in TripAdvisor's Instant Booking feature.

Shares of Priceline were unaffected, as investors and traders may have interpreted the agreement as a win only for TripAdvisor, a position that Naved Khan of Cantor Fitzgerald does not agree with.

It's A 'Win-Win'

According to Khan, the partnership represents a "win-win" for both companies, as TripAdvisor benefits from improved monetization while Priceline Group secures an "attractive deal."

Related Link: TripAdvisor Rips Following New Agreement With Priceline

Khan continued that the partnership is expected to begin in a few months and will initially feature Priceline Group's booking.com brand. This will provide a "boost" to its Instant Book offering, which had experienced "less than expected traction" so far. Bringing in a "major" online travel agency will provide an "immediate lift" to TripAdvisor and the company should benefit from increased booking volumes.

"We view Instant Book as key to TripAdvisor's success over the long run, given the rapid growth in the mobile audience and a sizeable monetization gap between mobile and desktop for TripAdvisor, which arguably Instant Book can help to bridge," Khan wrote in his note.

Benefits For Priceline

Meanwhile, Khan suggested that the deal also benefits Priceline Group for four distinct reasons: 1) the economic terms are favorable to Priceline Group, 2) Priceline Group will gain "the right brand exposure" on TripAdvisor, 3) the partnership will help diversify Priceline Group's traffic sources and 4) an expanded distribution and audience reach should strengthen its positioning against disruptive and new entrants like Airbnb.

Looking Ahead For TripAdvisor

Finally, Khan suggested that following the announcement, Expedia Inc (NASDAQ: EXPE) may also join in on TripAdvisor's Instant Book "to level the playing field." However, while Expedia may not receive as favorable terms as Priceline Group, the company could benefit from similar strategic advantages.

Ratings And Price Targets

Shares of TripAdvisor remain Hold rated with an unchanged $85 price target.

Shares of Priceline Group remain Buy rated with an unchanged $1,480 price target.

Shares of Expedia remain Buy rated with an unchanged $140 price target.

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