Morgan Stanley Downgradeds Ctrip.com International

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Morgan Stanley downgraded Ctrip.com International, Ltd. (ADR) CTRP from Overweight to Equal-weight and cut its price target from $75.90 to $57.

Analyst led by Philip Wan commented that “Competition is getting more intensive. Ctrip's major competitors are all focusing on market share rather than profitability. Therefore Ctrip will also match the competition.”

“In addition, Ctrip plans to investment more on talents and brand building campaigns in order to better expand into lower tier cities and lower end travel services. As a result, Ctrip expects to incur a non-GAAP operating loss in 4Q with non-GAAP operating
margin of ~-15 percent, or down 26 ppts sequentially.”

Wan noted “that this will be, if realized, the company's first quarterly non-GAAP operating loss since its IPO in 2003. The company also expects margins to stay flattish sequentially from 4Q14 to 1Q15.”

Wan concluded by raising “2015e net revenue by 3 percent. However we cut our 2014e and 2015e non-GAAP (adding back share-based compensation) net profit by 49 percent and 30 percent, respectively (GAAP by 85 percent and 47 percent, respectively). The stock is currently trading at 41x our 2015e non-GAAP EPADS (or 73x GAAP), higher than the 20-30x average in the past 5 years.”

Ctrip.com International, Ltd. (ADR) recently traded at $53.00, down 0.93 percent.

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Posted In: DowngradesPrice TargetAnalyst RatingsMorgan StanleyPhilip Wan
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