It was a rough week for a couple of international travel portals. Shares of China's Ctrip (NASDAQ: CTRP) and Argentina's Despegar.com (NYSE: DESP) declined 12% and 11%, respectively, last week, but the slides were not related.
Continue Reading Below
Despegar moved lower despite a bullish analyst initiation to kick off the week. There was no material news out of Ctrip, but Brightwire is reporting that its chairman is considering charging for flight bookings, a move that would increase revenue but possibly at the expense of nudging more users to book directly with airlines.
Every takeoff has its landing
Despegar went public at $26 last month, and it had moved higher in three of its first four weeks on the market before last week's descent. Despegar's namesake site is the leading online travel agency in Latin America. It operates in Brazil as Decolar.com. Despegar and Decolar mean "take off" in Spanish and Portuguese, respectively.
Growth investors flocking to Despegar in search of the next dot-com darling may be disappointed to learn that revenue actually declined slightly in 2016, weighed down by a dip in air ticketing revenue. Things have turned around so far in 2017, with revenue rising 28% through the first half of the year. Despegar turned profitable last year, and it remains in the black so far this year.
Latin America will have its ups and downs, and the upside is clear. Euromonitor International sees the market for online travel bookings in Latin America growing from $29.7 billion last year to $47.6 billion come 2020. However, it's also fair to say that there will be inflationary, political, and economic hiccups in the region along the way.
Continue Reading Below
Brad Erickson at KeyBanc initiated coverage on Despegar last week, setting a price target of $40. KeyBanc was one of the underwriters involved in taking Despegar public last week, so its bullishness isn't a surprise, but it's still nice to see a price goal well above September's IPO price. Erickson thinks the driver here will be growth in hotel and vacation package bookings.
Ctrip's no rookie. The Chinese speedster is working on its fourth consecutive year of revenue growth north of 30%. There are certainly risks in betting on China's travel industry, but it's been a good bet given the country's expanding middle class and booming economy.
Despegar and Ctrip took big hits last week, but the upside is substantial for both stocks. As long as the fundamentals continue to hold up the double-digit percentage declines last week have all the makings of a buying opportunity.
10 stocks we like better than Ctrip.com International
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Ctrip.com International wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of October 9, 2017