Market gains expected for Ctrip, Despegar

China’s Ctrip and Latin America’s Despegar are drawing optimistic outlooks from two financial analysts ahead of the release of their fourth-quarter results. 

In his analysis of Ctrip for SeekingAlpha, Gary Alexander says the company’s current valuation and growth potential in China make it a “slightly better buy” than dominant competitor the Priceline Group which he also likes.

As China’s leading OTA platform, Ctrip has been growing at a rate of about 40% - driven in large part by China’s expanding middle class and its leisure and luxury spending – and Alexander expects the upcoming year-end report to show 2017 was its first fully profitable year. 

While Ctrip has been down in recent months, Alexander says long-term, “there's nothing not to like about the largest OTA in the world's largest country.”

He cites a recent announcement from Ctrip’s CEO to pursue “lower-tiered” cities across China as a smart move to capture business in areas not served by other OTAs.

The recent acquisition of Trip.com also positions Ctrip to be at the forefront of using machine learning in travel search. 

Alexander also points to Ctrips gross margins – a massive 83% in the third quarter of 2017 – that show “nearly every dollar of incremental revenue flows through to the bottom line and justifies using a high revenue multiplier as a basis for the company's valuation.”

Up-and-comer

According to the Motley Fool, UBS analyst Eric Sheridan has boosted his rating of Argentina-based online travel site Despegar from neutral to buy. The company is divided into two business segments: air and packages, hotels and other travel products. 

The site went public in mid-September at $26 per share, rose in the subsequent weeks and then dropped back the mid-$20s in early December – indicative of the inherent turbulence in Latin America’s economic markets.

Sheridan is upgrading the stock because he believes it will benefit from an “improving economic climate and internet penetration trend in Argentina and Brazil.” 

While revenue dropped 3% in 2016, Despegar posted three quarter of at least 20% top-line growth in 2017. Despegar’s third quarter financial report showed revenue rose 24% to $131.5 million in that period.

And while net income declined 22% to $11.2 million, the stock still beat expectations.

Sheridan cites the platform’s growing popularity, with gross bookings up by 32% in the latest quarter and the number of transactions rising 25%.