Ctripcom International Ltd (NASDAQ:CTRP)
Consumer Discretionary - Internet & Catalog Retail | Reports June 15, After Market Closes
Key Takeaways
- The Estimize consensus is calling for a loss of 63 cents per share on $636.13 million in revenue, 4 cents higher than Wall Street on the bottom line and $3 million on the top
- Ctrip has seen revenue steadily rise while earnings decline over the past 2 years
- The travel industry is still one of the fastest growing industries which bodes well for industry leading Ctrip.
Chinese travel has been a fast growing industry in the past few years, prompting travel booking companies to rush to get a piece of the pie. Ctrip has reaped the rewards of this trend, posting better than expected earnings in each quarter of 2015. However early indications look as though the company will disappoint investors when it kicks off fiscal 2016.
The Estimize consensus is calling for a loss of 63 cents per share on $636.13 million in revenue, 4 cents higher than Wall Street on the bottom line and $3 million on the top. Compared to a year earlier profitability is projected to decline by 656% while sales could increase 70%. Earnings per share estimates have been cut over 1000% since its last report, reflecting the company’s inability to turn a profit. Given the sudden downward momentum, it’s not surprising that the stock has fallen 17.8% in the past 6 months.
The booming travel industry in China has been the primary driver of steadily increasing revenue in the last 2 years. Last quarter, revenue grew 50% on increases in net commision, accommodation reservation and transportation ticketing. Leisure and outbound tourism have been the two biggest drivers in the travel market and are seeing the largest gains. Ctrip should have no problem generating revenue as it holds a dominant market share in the region.
Recent partnerships with eLong and Qunar are expected to propel Ctrip’s market share in Chinese hotel and airline bookings to about 70%-80%. Moreover, Priceline's (NASDAQ:PCLN) recent $500 million investment in Ctrip will help bolster its expansion in outbound travel. Ctrip’s consolidation of the Chinese travel industry and growth in the global market gives it the scale and distribution power to generate more meaningful margins.
While Ctrip maintains a stranglehold in the China travel industry, its mounting losses could become problem in the near future, if it hasn’t already. Shareholders could bare the brunt of its shortcomings if Ctrip is unable to turn a profit.
