Ctrip.com (CTRP) Stock Falls After Qunar Rejects Bid

NEW YORK (TheStreet) -- Shares of Ctrip.com (CTRP) were falling 8.1% to $75 Tuesday after competitor Qunar Cayman Islands (QUNR) rejected the Chinese online travel company's buyout offer.

"After careful consideration of such offer, we declined to pursue it in a letter response dated June 1, 2015," Qunar said in its first quarter earnings report. "However, consistent with our policy to consider all potential strategic opportunities that may benefit our company and our shareholders, we remain open to engaging in further discussions with Ctrip as well as with other strategic players in our sector."

Analyst firm Stifel Nicolaus downgraded Ctrip to "hold" from "buy" following Qunar's rejection.

Analyst George Askew expects Ctrip to increase its investment spending in the second half of 2015. "Assuming that Ctrip increases its sales and marketing budget by about $65 million in each of 3Q15 and 4Q15, the additional $130 million in spending (on a revenue base we estimate at $940 million) would wipe out non-GAAP operating income for the full year 2015," Askew wrote.

TheStreet Ratings team rates CTRIP.COM INTL LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CTRIP.COM INTL LTD (CTRP) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 19.0%. Since the same quarter one year prior, revenues rose by 46.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, CTRP's share price has jumped by 46.28%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The gross profit margin for CTRIP.COM INTL LTD is rather high; currently it is at 69.56%. Regardless of CTRP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -5.44% trails the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, CTRIP.COM INTL LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 209.5% when compared to the same quarter one year ago, falling from $18.56 million to -$20.32 million.
  • You can view the full analysis from the report here: CTRP Ratings Report

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