Ctrip.com Downgraded to a Hold - Analyst Blog
We are downgrading Ctrip.com International, Ltd. - ADR (CTRP) shares from Buy to Hold. Longer term, Ctrip.com is well-positioned to generate strong growth as more Chinese consumers use online travel-related services. Unfortunately, the company's near-term picture is not as bright.
Slowing global economic growth is reducing the demand for travel-related services, and that is negatively impacting Ctrip.com's revenues and profit margins. We are lowering our estimates for 2008 and 2009 to reflect slower expected growth and lower profit margin assumptions. Our target price of $29 is about 26x our 2009 EPS estimate.
CTRP shares trade at 31x our 2008 EPS estimate and 25x our 2009 EPS estimate. This valuation is reasonable, given the company's long-term growth prospects. However, slowing economic growth is negatively affecting the company's sales and profit margins in the short term. Those headwinds will most likely lead to estimate cuts in the months ahead, and that could make Ctrip.com shares look even more expensive.
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