Brean Murray, Carret & Co. (BMC) upgraded its rating on Ctrip.com International Ltd. (NASDAQ:CTRP) to "Hold" from "Sell", saying the stock has reached its previous target price with the recent sell-off.
"On the fundamental side, we have become incrementally more positive, as 1Q results + 2Q guidance seem to indicate that CTRP is stabilizing at a new revenue growth run rate of 15 percent - 20 percent with around 30 percent non GAAP operating margin, the base scenario the market has been looking for, in our view," the brokerage wrote.
With management reiterating its stable margin outlook in 2012 (vs. two consecutive cuts from the two previous quarters), BMC expects improving sentiment from the market and investor comfort of reinvesting in the stock.
Furthermore, BMC is encouraged by the effort and progress CTRP has made in building out its hotel product offerings and do view it as a long term strategic positive.
That said, the brokerage expects these initiatives to take time to ramp up and they may have a limited impact on financials in the near term.
The travel service provider recently launched a high-end travel brand, HH Travel, along with its acquisition of Trip TM, a luxury travel agency in China, to offer luxury tour packages for high-end travelers.
BMC views these initiatives as a strategic positive; they could help the company to gain market share in the leisure travel market and drive growth in the long term.
American depositary receipts of CTRP jumped 8.96 percent to trade at $21.43 on Thursday. Over the past year, the stock has been trading between $18.92 and $47.54.