NEW YORK (TheStreet) - Ctrip.com International (CTRP) shares plunged Wednesday following the Shanghai-based online travel company's forecast that fourth-quarter revenue growth would slow and margins would be significantly lower due to spending on expanding operations.
The Chinese company warned on Tuesday in preliminary earnings results that it expects net revenue growth of 30% for the fourth quarter, which was below consensus expectations. Ctrip also issued margin guidance, warning of "a negative non-GAAP operating margin of -10% to -17%" for the fourth quarter, "before a recovery to positive territory" in 2015, according to Bank of America Merrill Lynch analyst Eddie Leung.
Shares were falling 9.4% to $52.96. Here's what analysts said.¿
Michael Olson, Piper Jaffray (Neutral; $49 PT)
Ctrip reported Q3 upside, but guided revenue slightly below consensus with margins for Q4 expected to decrease 3,500bps y/y as the company experiences further competitive pressure. Specifically, for Q4, revenue guidance of 30% growth is 200bps below the Street and PF op margin guidance of -12% to -17% is materially below our previous estimate of +14%. Management reiterated expectations of 20%-30% PF op margins long-term, but visibility on multi-year margin trajectory is low due to increasing competition. Furthermore, beyond Q4, the company suggested that Q1 PF op margin may be flattish q/q and 2015 PF op margin may be similar to 2014 (low to mid-single digits). While Ctrip has a leading position in a massive secular growth market, it is unclear when margin pressure will ease. Reit Neutral; PT to $49 (stock traded ~$55 after hours).