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TripAdvisor sinks after 54 percent surge this year

The Associated Press

NEW YORK (AP) -- TripAdvisor's stock was a victim of its own success Monday, dropping 5 percent.

THE SPARK: The online travel review company's shares soared 54 percent this year through Friday's close, gaining nearly four times more than the overall stock market. Michael Purcell, an analyst at Stifel Nicolaus, said that TripAdvisor's surge has made the company's stock look fully priced. In a note Monday, Purcell lowered his rating on TripAdvisor Inc. to "Hold" from "Buy," explaining that he hasn't changed his earnings estimates for the Newton, Mass.-based company.

THE BACKGROUND: For Purcell, the issue was simply that all the good news appears to be accounted for in TripAdvisor's share price. TripAdvisor had already blown through Stifel Nicolaus's target price of $58 in the middle of May. As of Friday, it was trading at 38 times Stifel Nicolaus's estimate of its earnings for the next 12 months. That's more than twice what investors pay for the average company.

SHARE ACTION: In late trading Monday, TripAdvisor Inc. fell $2.70, or 4.2 percent, to $61.79. It has traded between $28.63 and $65.41 in the past 52 weeks.