UPDATE: Citigroup Initiates Coverage on Ctrip.com with Sell Rating, $11.40 PT

In a report published Wednesday, Citigroup initiated coverage on Ctrip.com International

with a Sell rating and a $11.40 price target. Citigroup noted, “We initiate coverage of Ctrip with a Sell and TP of US$11.4, the lowest on the Street, derived from a DCF model, implying 23.5% downside and equivalent to 10x 12E non-GAAP EPADS. Although the stock has fallen 54% since its announcement to march into the leisure travel market, we are still concerned that the competitive landscape and dynamics of the leisure market have changed to Ctrip's disadvantage, and the company's passive aggressive strategies, such as its recent US$500m marketing campaign, could lead to margin declines. We forecast that Ctrip's top-line growth will slow to 17% in 3Q and FY12, and operating margins will shrink to 17% and 13% for FY12 and FY13, respectively, due to higher marketing expenses, continued mix shift to leisure travel, and China's slowing economy.” Ctrip.com International closed on Tuesday at $14.90.